Japanese automakers Honda and Nissan have announced plans to work toward a merger that would form the world’s third-largest automaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors also had agreed to join the talks on integrating their businesses.
Automakers in Japan have lagged their big rivals in electric vehicles, and are trying to cut costs and make up for lost time as newcomers like China’s BYD and U.S. market leader Tesla devour market share.
Honda’s president, Toshihiro Mibe, said Honda and Nissan will pursue unifying their operations under a joint holding company. Honda will initially lead the new management, retaining the principles and brands of each company.
They aim to have a formal merger agreement by June and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.
No dollar value was given and the formal talks are just starting, according to Mibe. There are “points that need to be studied and discussed,” he said. “Frankly speaking, the possibility of this not being implemented is not zero.”
The Japanese government has been sounding the alarm on China’s existential threat to its auto industry since at least 2019, when it reportedly urged Honda and Nissan to meet and discuss potential consolidation.
China’s auto sector has seen a surge of exports in the last several years, with one industry group claiming that it had overtaken Japan as the world’s top auto exporter in 2023.
A merger of Honda, Nissan and Mitsubishi could result in a behemoth worth more than $50 billion US based on the market capitalization of all three automakers.
Together, the companies would gain scale to compete with Toyota and with Germany’s Volkswagen. Toyota has technology partnerships with Japan’s Mazda and Subaru.
Planned merger a ‘desperate move’
News of a possible merger surfaced earlier this month, with unconfirmed reports saying Taiwanese iPhone maker Foxconn was seeking to tie up with Nissan by buying shares from the Japan’s company’s other alliance partner, Renault of France.
Nissan’s CEO Makoto Uchida said there had been no direct approach to his company from Foxconn. He also acknowledged that Nissan’s situation was “severe.”
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