TOKYO — In a significant development within the automotive sector, Japanese car manufacturers Honda and Nissan have revealed their intentions to pursue a merger, which could establish the third-largest car manufacturer globally by sales figures. This move comes in response to the industry’s rapid shift away from fossil fuels and a need for innovative strategies to adapt to changing market conditions.
The two companies disclosed on Monday that they had signed a memorandum of understanding and that Mitsubishi Motors, a smaller player in Nissan’s alliance, will also participate in the discussions aimed at business integration. According to Honda’s president, Toshihiro Mibe, both Honda and Nissan are looking to consolidate their operations under a joint holding company. Initially, Honda will oversee the management of the new entity, which will retain the distinct identities and brands of each automaker. Mibe stated that they aspire to formalize the merger agreement by June and aim to complete the process, listing the holding company on the Tokyo Stock Exchange by August 2026.
Although specific financial details regarding the merger have not been disclosed, Mibe acknowledged that while discussions are in the preliminary stages, there are complexities that must be addressed. He expressed that “the possibility of this not being implemented is not zero,” indicating that several factors will influence the final outcome.
Japanese automakers have faced challenges in keeping pace with global competitors, particularly in the electric vehicle (EV) sector. A merger could create an automotive giant valued at over $50 billion, empowering Honda, Nissan, and Mitsubishi to compete more effectively against major players like Toyota and Volkswagen. Reports suggest that the discussions were partly prompted by interest from Foxconn, the Taiwanese iPhone manufacturer, which was rumored to be in talks to acquire shares from Renault, Nissan’s partner.
Nissan’s CEO, Makoto Uchida, clarified that there had been no direct overtures from Foxconn regarding shares but acknowledged that Nissan is in a challenging financial situation. Even should the merger occur, Toyota would still lead the Japanese automotive market, having produced 11.5 million vehicles in 2023, while the combination of the three firms could yield around 8 million vehicles collectively.
As part of their collaboration, Nissan, Honda, and Mitsubishi announced in August their intention to share technology and components for electric vehicles, including batteries, and to jointly explore software for autonomous vehicles. This partnership follows a preliminary agreement reached between Nissan and Honda earlier in the year.
Nissan has been recovering from the fallout of a scandal involving its former chairman, Carlos Ghosn, who was arrested in late 2018 on accusations of fraud and asset misuse. Ghosn later made a public statement criticizing the proposed merger as a “desperate move.”
Experts suggest that Honda could benefit from Nissan’s portfolio, particularly in large SUVs like the Armada and Infiniti QX80, which Honda currently lacks. Furthermore, Nissan’s extensive experience in battery production and hybrid technologies could assist Honda in developing its future electric and hybrid models.
In November, Nissan announced significant layoffs, cutting approximately 6% of its global workforce, and plans to reduce production capacity by 20% following a quarterly loss of 9.3 billion yen. The current economic climate has prompted management restructuring, with Uchida taking a substantial pay reduction to address the company’s financial issues and improve market responsiveness.
Uchida expressed optimism about the potential merger, stating, “If this integration comes to fruition, we will be able to deliver even greater value to a wider customer base.” Meanwhile, Nissan faces a credit outlook downgrade by Fitch Ratings, which cited declining profitability due to price reductions in North America, although the company maintains solid cash reserves totaling 1.44 trillion yen.
Recently, Nissan’s share price has been regarded as an attractive opportunity for investors, with shares rising by 1.6% on Monday, and having increased over 20% following the merger announcement. Meanwhile, Honda’s shares experienced a rise of 3.8% despite a nearly 20% drop in net profits for the first half of the fiscal year, due to decreased sales in China.
This merger initiative illustrates a broader trend of consolidation within the automotive industry. Reflecting on these developments, Cabinet Secretary Yoshimasa Hayashi remarked that Japanese companies must remain competitive in a rapidly evolving market, emphasizing the growing importance of advancements in battery storage and software capabilities for future survival in the global landscape.
