TOKYO — In a significant development, Japanese automakers Honda and Nissan have revealed their intentions to pursue a merger that could lead to the establishment of the third-largest automotive group globally by sales volume. This move comes amid a notable shift in the automotive sector as it pivots away from fossil fuels toward more sustainable energy solutions.
On Monday, the two firms announced the signing of a memorandum of understanding. The discussions will also include Mitsubishi Motors Corp., a smaller member of the Nissan alliance, which has agreed to participate in these negotiations aimed at integrating their respective businesses.
Japanese automobile manufacturers have been facing challenges in the electric vehicle segment, falling behind competitors like Tesla and China’s BYD, who have aggressively captured market share. In an effort to catch up, Honda and Nissan are looking to streamline operations and reduce costs.
Toshihiro Mibe, president of Honda, indicated that the objective is to combine operations under a new holding company, with Honda expected to lead the new entity while preserving the unique identities and brands of each automaker. The goal is to formalize the merger agreement by June and complete the process by August 2026, allowing the holding company to be listed on the Tokyo Stock Exchange. Mibe did not disclose any financial details, emphasizing that the talks are preliminary and there are still many factors to consider.
He noted, “There are points that need to be studied and discussed. Frankly speaking, the possibility of this not being implemented is not zero.” The potential merger could be valued at over $50 billion, drawing attention to the combined market capitalizations of Honda, Nissan, and Mitsubishi. This strategic alignment would help them better compete with well-established automakers such as Toyota and Germany’s Volkswagen AG, both of which have formed partnerships with other Japanese companies like Mazda and Subaru.
Earlier speculation about the merger was ignited by reports suggesting that Foxconn, a Taiwanese manufacturer known for producing iPhones, was interested in acquiring shares of Nissan from Renault, its alliance partner in France. However, Nissan’s CEO Makoto Uchida clarified that Foxconn had yet to approach them directly and acknowledged that Nissan’s current situation is challenging.
Despite the merger, Toyota would maintain its position as the leading Japanese automotive manufacturer, having produced 11.5 million vehicles in 2023. In contrast, Honda, Nissan, and Mitsubishi collectively accounted for approximately 8 million vehicles last year, with Honda manufacturing 4 million, Nissan around 3.4 million, and Mitsubishi over 1 million.
Mibe emphasized the necessity for both companies to undertake significant change in response to the ongoing transformation in the mobility sector, rather than merely collaborating in select areas. Previously, the three automakers had agreed to share components for electric vehicles, including batteries, and collaborate on software development for autonomous driving technology, paving the way for enhanced specialization in electrification.
Nissan’s recent journey has been troubled, particularly after the scandal related to the arrest of its former chairman, Carlos Ghosn, in late 2018 on fraud and asset misappropriation charges, which he has denied. Ghosn, who managed to escape to Lebanon after being granted bail, criticized the proposed merger, describing it as a “desperate move.”
Technical experts believe that Honda could benefit significantly from Nissan’s strong portfolio in larger SUVs and extensive experience in electric vehicle production. This includes truck-based models with impressive towing capabilities and off-road performance. Additionally, Nissan’s expertise in battery production and gas-electric hybrid systems could aid Honda in ramping up its own electric vehicle offerings.
Despite announcing a reduction of 9,000 jobs, representing around 6% of its global workforce, and cutting global production capacity by 20% after reporting a quarterly loss, Nissan continues its restructuring under Uchida’s leadership. Uchida has accepted a 50% pay reduction and is committed to enhancing efficiency in response to evolving market demands and global challenges.
Uchida remarked that should this merger be realized, the integration would provide enhanced value for a broader customer base. While Fitch Ratings recently adjusted Nissan’s credit outlook to “negative” due to declining profitability, the firm acknowledged its strong financial structure with substantial cash reserves of 1.44 trillion yen ($9.4 billion).
Nissan’s stock has seen a downward trend, rendering it perceived as a bargain in the market, though shares rose by 1.6% on Monday, following a 20% leap after news of the merger discussions. Meanwhile, Honda’s shares increased by 3.8%, despite the company reporting a nearly 20% decline in net profits for the first half of the April-March fiscal year, largely due to challenges in the Chinese market.
This merger initiative aligns with a broader industry trend toward consolidation, highlighting the need for Japanese automotive companies to enhance competitiveness in a rapidly evolving market. At a press briefing, Cabinet Secretary Yoshimasa Hayashi underscored the importance of innovation in storage batteries and software, indicating that companies must adapt to survive amid international competition.
