Honda Motor Co. and Nissan Motor Co., two of Japan’s leading automakers, announced on Monday that they are in discussions to merge by 2026.
The potential tie-up marks a transformative moment in the global auto industry, driven by intensifying competition from Chinese electric vehicle (EV) makers and innovative rivals such as Tesla.
If finalized, the merger would create the world’s third-largest automotive group by vehicle sales, following Toyota and Volkswagen.
The partnership would enable both companies to scale operations, share resources, and strengthen their positions against challengers like BYD, a dominant Chinese EV manufacturer.
The proposed merger is the largest shift in the automotive landscape since Fiat Chrysler and PSA joined forces in 2021 to form Stellantis. Mitsubishi Motors, in which Nissan is the largest shareholder, is also considering joining the alliance and is expected to make a decision by January 2024.
“The rise of Chinese automakers and new players has significantly reshaped the car industry,” Honda CEO Toshihiro Mibe said. “We need to build the capabilities to compete by 2030, or risk being left behind.”
Honda and Nissan aim to achieve combined annual sales of ¥30trn ($191bn) and operating profits exceeding ¥3trn. The companies plan to conclude negotiations by June 2025, followed by the creation of a holding company in August 2026, at which point shares of both firms will be delisted.
Honda, valued at over $40bn—approximately four times Nissan’s market capitalization—will appoint the majority of board members in the merged entity.
Adding Mitsubishi Motors to the alliance could elevate the group’s annual global sales to over 8 million vehicles, rivaling South Korea’s Hyundai and Kia, the current third-largest automaker.
Discussions of a potential merger follow a series of collaborative initiatives between the two automakers. In March, they announced plans to cooperate on EV and software development, later expanding the partnership to include Mitsubishi Motors.
Both companies have faced recent challenges. Nissan has announced plans to cut 9,000 jobs and reduce global production capacity by 20 per cent after experiencing a slump in sales in key markets like China and the U.S. Honda also reported lower-than-expected earnings due to declining sales in China, though its motorcycle and hybrid car segments remain strong.
“This is not a rescue of Nissan,” Mibe clarified, noting that Nissan’s ongoing business turnaround is a prerequisite for the merger.
The announcement boosted investor confidence, with shares in Honda rising 3.8 per cent, Nissan gaining 1.6 per cent, and Mitsubishi Motors up by 5.3 per cent on Monday. The Nikkei 225 index closed 1.2 per cent higher.
However, skepticism remains. Former Nissan Chairman Carlos Ghosn, speaking from Lebanon, doubted the alliance’s success, arguing that the two automakers lack complementary strengths. Renault, Nissan’s largest shareholder, stated that it would “discuss and consider all possible options” concerning the merger.
Meanwhile, Foxconn, which had approached Nissan about a potential bid to expand its EV manufacturing business, has paused its efforts after preliminary discussions.
Nissan CEO Makoto Uchida dismissed speculation that Foxconn’s approach influenced the merger talks, emphasizing the strategic alignment with Honda. Honda’s Mibe reiterated that the company’s partnerships with General Motors would remain unaffected by the deal.