👉 Background: A few weeks ago Nissan warned that it only had 12-14 months of gas left in the tank if they didn’t get some financial help. Yep, there was a genuine risk that the Pathfinder and X-Trail were going to disappear into the history books of the car industry.

👉 What happened: Now, Honda and Nissan, who are both Japanese companies, have confirmed they’re looking to merge — because both companies have kinda struggled lately.

👉 What else: Nissan’s profit margin was cut by 70% over the past year, while Honda’s full year profits were expected to drop more than 14% from the previous year. So, this joint merger would allow the companies to gain economies of scale.

What's the key learning?

💡Economies of scale are the cost advantages that exist when a company (or merged companies) increases the scale of its operations. In this case, it’s about producing more cars for fewer costs.

💡When you’re churning out millions and millions of cars, your costs generally become cheaper:

• Your cost of raw materials is cheaper because you’re buying in bulk
• The cost of producing the materials is cheaper because you can make the most of your machines
  

💡If Nissan and Honda tie the knot, they would become the third-biggest carmaker by sales volume - behind Toyota and Volkswagen. And this would allow them to compete on the big stage once again.