The two Japanese automakers are in advanced merger talks, with a deal expected to close by 2026. The merged entity would rank as the world’s third-largest automaker by sales, behind Toyota and Volkswagen.

This historic move in Japan’s automotive industry aims to counter the growing threat posed by Chinese electric vehicle (EV) manufacturers to traditional global automakers.

A Major Shift in the Global Auto Industry

The merger would create a larger, more competitive conglomerate, enabling Honda and Nissan to share resources in the face of intense competition from Tesla and Chinese automakers like BYD. Honda, Japan's second-largest automaker, and Nissan, its third-largest, coming together would mark the most significant industry shift since Fiat Chrysler Automobiles and PSA merged in 2021 to form Stellantis in a $52 billion deal.

Mitsubishi, in which Nissan holds a majority stake, is also considering joining the merger and plans to announce its decision by January 2025. Executives from all three companies recently held a joint press conference in Tokyo.

Addressing New Industry Challenges

“The rise of Chinese automakers and new competitors has reshaped the auto industry,” said Honda CEO Toshihiro Mibe. He emphasized the importance of electrification and autonomous driving technologies.

“We must build the capacity to compete with them by 2030, or we risk being overtaken,” Mibe added.

The combined revenue of Honda and Nissan is expected to reach 30 trillion yen ($191 billion), with operating profits exceeding 3 trillion yen through this potential merger.

The companies plan to finalize negotiations by June 2025 and establish a parent company by August 2026, after delisting their respective shares.

Honda, with a market capitalization of over $40 billion—four times that of Nissan—will appoint most of the board members for the new entity.

Global Sales Impact

Incorporating Mitsubishi into the group would raise total global sales for the Japanese automakers to over 8 million vehicles annually. Currently, Hyundai and Kia of South Korea hold the third spot, with 7.34 million vehicles sold in 2023.

Earlier this year, Honda and Nissan announced joint efforts in electrification and software development. By August, the collaboration expanded to include Mitsubishi.

However, both companies face challenges. In November, Nissan announced plans to cut 9,000 jobs and reduce global production capacity by 20% after sharp declines in sales in China and the U.S. Honda also reported disappointing financial results due to declining sales in China, though its stable motorcycle and hybrid vehicle businesses have maintained its financial resilience.

“This is not a rescue of Nissan,” Mibe stated, while adding that Nissan’s business recovery is a “prerequisite” for the merger.

Market Challenges

Like other foreign automakers, Honda and Nissan have lost market share in China—the world’s largest car market—to BYD and domestic EV and hybrid manufacturers offering advanced software.

In a separate online press conference on December 23, Carlos Ghosn, Nissan’s former chairman currently wanted by authorities, expressed skepticism about the merger, citing a lack of synergy between Honda and Nissan.

Renault, Nissan’s largest shareholder, said it would “discuss with Nissan and consider all possible options.” Sources indicate that Renault is open to the alliance between Honda and Nissan.

Foxconn, the iPhone manufacturer seeking to expand into EV production, reportedly approached Nissan with a proposal, but the Japanese company declined, according to Reuters.

(Sources: AFP, Kyodo, Reuters)

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