TOKYO — Japanese automakers Honda and Nissan have announced plans to work towards a merger, forming the world’s third-largest automaker by sales. This move comes as the industry undergoes dramatic changes in its transition away from fossil fuels.
On Monday, the two companies signed a memorandum of understanding and smaller Nissan alliance member Mitsubishi Motors also agreed to join the talks on integrating their businesses.
Honda’s president, Toshihiro Mibe, stated that the two companies will pursue unifying their operations under a joint holding company, with Honda initially leading the new management. The aim is to have a formal merger agreement by June and to complete the deal by August 2026.
While no dollar value was given, Mibe emphasized that the formal talks are just starting and there are still points that need to be studied and discussed. However, he also stated that the possibility of the merger not being implemented is not zero.
This potential merger comes as Japanese automakers have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time. The news of a possible merger surfaced earlier this month, with reports stating that the talks on closer collaboration were partly driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan, which has an alliance with Renault SA of France and Mitsubishi.
If the merger were to go through, it could result in a behemoth worth more than $50 billion based on the market capitalization of all three automakers. Together, Honda and the Nissan alliance with Renault SA of France and smaller automaker Mitsubishi Motors Corp. would gain scale to compete with Toyota Motor Corp. and Germany’s Volkswagen AG. However, even after the merger, Toyota would remain the leading Japanese automaker, with the three smaller companies producing a combined 8 million vehicles compared to Toyota’s 11.5 million in 2023.
The potential merger between Honda and Nissan is not surprising, as the two companies have already announced plans to share components for electric vehicles and jointly research software for autonomous driving. This initial agreement was made in March, and in August, the two companies were joined by Mitsubishi in their efforts to adapt to the dramatic changes centered around electrification.
Honda, Japan’s second-largest automaker, is seen as the only likely Japanese partner able to effect a rescue of Nissan, which has struggled since the scandal involving its former chairman Carlos Ghosn in late 2018. Ghosn, who denies the charges against him, was arrested on charges of fraud and misuse of company assets and eventually fled to Lebanon.
However, Ghosn has derided the planned merger as a “desperate move.” From Nissan, Honda could potentially gain truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80, as well as their expertise in building batteries and electric vehicles and gas-electric hybrid powertrains. This could help Honda in developing its own EVs and next generation of hybrids.
Nissan has been facing financial difficulties, reporting a quarterly loss of $61 million and announcing plans to cut 9,000 jobs and reduce global production capacity by 20%. The company recently reshuffled its management and its chief executive, Makoto Uchida, took a 50% pay cut to take responsibility for the financial woes. Uchida stated that Nissan needed to become more efficient and respond better to market tastes, rising costs, and other global changes.
“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a wider customer base,” Uchida said.
While Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing worsening profitability, it also noted that the company has a strong financial structure and solid cash reserves of $9.4 billion. Additionally, Nissan’s share price has fallen to a point where it is considered a bargain.
The potential merger between Honda and Nissan reflects an industry-wide trend towards consolidation. As the business environment surrounding the automobile industry continues to change rapidly, with competitiveness in storage batteries and software becoming increasingly important, it is expected that measures will be taken to ensure survival in the international market.
In response to the news, Cabinet Secretary Yoshimasa Hayashi stated that he would not comment on the details of the automakers’ plans, but emphasized the need for Japanese companies to stay competitive in the fast-changing global market.
“As the business environment surrounding the automobile industry largely changes, with competitiveness in storage batteries and software is increasingly important
