Japanese automakers Honda and Nissan have announced plans to explore a merger, a move that would create the world’s third-largest automaker by sales.
The two companies signed a memorandum of understanding on Monday, marking the beginning of discussions to integrate their operations. Smaller member Mitsubishi Motors will also join the talks, with the goal of creating a holding company that would include all three automakers.
Honda’s president, Toshihiro Mibe, shared that the merger discussions aim to unify the companies under a joint holding structure. Initially, Honda will lead the new management, preserving each company’s brands and principles. The formal merger agreement is expected by June, with plans to finalize the deal and list the new holding company on the Tokyo Stock Exchange by August 2026. However, Mibe emphasized that there are still important details to address, and while the deal is progressing, it is not guaranteed to proceed.
As the automotive industry faces significant changes, particularly in the shift away from fossil fuels, Japanese automakers have struggled to keep pace with rivals in electric vehicle (EV) development. The merger between Honda and Nissan, along with Mitsubishi Motors, would create a more competitive entity, combining their resources to better compete with leaders such as Toyota and Volkswagen.
In 2023, Nissan produced 3.4 million vehicles, Honda made 4 million, and Mitsubishi manufactured just over 1 million. The merger would position the combined entity as a major player in the industry, with the potential to sell approximately 8 million vehicles annually. While Toyota remains the largest Japanese automaker, having sold 11.5 million vehicles in 2023, the merger would help the new company close the gap with the industry giants.
The discussions between Nissan and Honda also reflect broader industry trends toward consolidation, as automakers seek to share the financial burdens of developing new technologies. Both companies have faced financial challenges in recent years. Nissan, for example, has been struggling after a high-profile scandal involving former chairman Carlos Ghosn and has reported declining profitability, particularly in China. Despite this, Nissan maintains a strong financial structure with substantial cash reserves.
In contrast, Honda’s financial performance has been relatively healthier, though it also faces challenges, including weaker sales in China. By combining their strengths, the two companies hope to achieve economies of scale, reduce costs, and increase production capacity. Analysts suggest that these efforts could help them better compete in the rapidly changing market for electric vehicles and advanced automotive technologies.
The merger is not without risks, and the companies will need to address a variety of issues, including the potential for a “chemical reaction” of new value. If they fail to innovate effectively, the merger could simply be an attempt to consolidate weak entities. Moreover, in the highly competitive Chinese market, both Honda and Nissan have already lost ground to local rivals that are more cost-competitive and technologically advanced.
With input from the Associated Press and the New York Times.
