Japanese automobile giants Honda and Nissan have unveiled plans to merge, potentially creating the world’s third-largest car manufacturer by sales, as the industry shifts focus towards electric vehicles and sustainability.
Both companies confirmed the signing of a memorandum of understanding on Monday. Mitsubishi Motors, a smaller Nissan alliance partner, is also set to participate in discussions to integrate operations.
Honda’s president, Toshihiro Mibe, stated that the companies aim to consolidate under a joint holding company, with Honda initially taking the lead in management. The brands will maintain their unique identities, and a formal agreement is anticipated by June, with completion targeted for August 2026.
Although the merger's financial details remain undisclosed, Mibe emphasized that talks are in preliminary stages, acknowledging uncertainties about the outcome.
Japan’s automakers are striving to reduce costs and accelerate their transition to electric vehicles to keep pace with global competitors.
Speculations about the merger surfaced earlier this month, linked to reports that Taiwan’s Foxconn was exploring ties with Nissan. Nissan currently operates in alliance with France’s Renault and Mitsubishi Motors.
Should the merger proceed, it could result in a combined market valuation exceeding $50 billion. The integration would enhance competitiveness with industry leaders like Toyota, which produced 11.5 million vehicles in 2023, and Volkswagen. The combined output of Honda, Nissan, and Mitsubishi would total approximately 8 million vehicles annually, based on 2023 figures.
In August, the three companies had already announced plans to collaborate on electric vehicle components, including batteries, and to develop autonomous driving software, building on a preliminary March agreement between Honda and Nissan.
Honda, Japan’s second-largest automaker, is seen as a potential stabilizing force for Nissan, which has struggled since the 2018 scandal involving its former chairman Carlos Ghosn, who fled to Lebanon after being charged with fraud—charges he denies.
Ghosn criticized the proposed merger as a “desperate move” during a video press conference from Tokyo.
Industry analysts believe Honda could benefit from Nissan’s expertise in large SUVs, hybrid technologies, and battery development. In November, however, Nissan announced plans to cut 9,000 jobs globally and reduce production capacity by 20% after posting a quarterly loss of 9.3 billion yen ($61 million).
Nissan CEO Makoto Uchida took a 50% pay cut and emphasized the need for improved efficiency and responsiveness to market trends. Uchida expressed optimism about the merger’s potential to deliver more value to customers.
Despite recent challenges, Fitch Ratings downgraded Nissan’s credit outlook to “negative,” citing profitability concerns but acknowledged its strong cash reserves of 1.44 trillion yen ($9.4 billion).
Following reports of the merger, Nissan’s shares rose 1.6% on Monday, having surged over 20% last week. Honda’s shares also gained 3.8% despite reporting a near 20% profit drop for the first half of its fiscal year.
This proposed merger highlights the broader trend of consolidation in the automotive sector amid intensifying competition and technological advancements.
Cabinet Secretary Yoshimasa Hayashi refrained from commenting on specific merger details but stressed the importance of maintaining competitiveness in storage batteries and software to meet global challenges.
“As the automotive industry undergoes major transformations, we expect companies to take the necessary steps to remain competitive internationally,” Hayashi remarked.
