Honda and Nissan Announce Merger Talks to Form 3rd Largest Auto Group

Honda and Nissan announced on Monday that they have initiated discussions regarding a potential merger. This move represents a significant shift in Japan's automotive sector, reflecting the growing competitive pressure from Chinese electric vehicle (EV) manufacturers. If successful, the merger would form the world's third-largest automotive group by vehicle sales, following Toyota (7203.T) and Volkswagen. The integration aims to enhance resource sharing and bolster their ability to compete with industry leaders like Tesla and agile Chinese rivals such as BYD.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The collaboration between Honda, Japan’s second-largest automaker, and Nissan, its third-largest, would be the most transformative development in the global auto industry since Fiat Chrysler Automobiles and PSA united in 2021 to establish Stellantis in a $52 billion deal. Mitsubishi Motors, in which Nissan holds a significant stake, is also considering joining the alliance, according to the companies.

During a joint press conference in Tokyo, Honda CEO Toshihiro Mibe emphasized the urgency of adapting to the evolving industry landscape, stating, "The rise of Chinese automakers and new players has changed the car industry quite a lot. We have to build up capabilities to fight with them by 2030, otherwise we'll be beaten."

Mibe said: “Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing. Honda and Nissan are two companies with distinctive strengths. We are still at the stage of starting our review, and we have not decided on a business integration yet, but in order to find a direction for the possibility of business integration by the end of January 2025, we strive to be the one and only leading company that creates new mobility value through chemical reaction that can only be driven through synthesis of the two teams."

The proposed merger targets combined sales of 30 trillion yen ($191 billion) and an operating profit exceeding 3 trillion yen. The companies aim to conclude negotiations by June 2025 and establish a holding company by August 2026, at which point their shares would be delisted. Honda, valued at over $40 billion, will appoint the majority of the new entity’s board, while Nissan, with a market capitalization of approximately $10 billion, will also play a key role.

Including Mitsubishi Motors in the alliance would push the group’s global sales beyond 8 million vehicles, overtaking South Korea’s Hyundai and Kia, currently the world’s third-largest auto group. Honda and Nissan have been exploring collaborative opportunities, including electrification and software development, and extended their cooperation to Mitsubishi Motors in August.

Recent challenges underscore the urgency of this merger. Last month, Nissan announced plans to reduce its workforce by 9,000 and cut global production capacity by 20% following sharp sales declines in China and the U.S. Honda also reported weaker-than-expected earnings due to declining sales in China. Both companies have struggled to compete with local Chinese brands like BYD, which excel in producing EVs and hybrids equipped with cutting-edge software.

Nissan Director, President, CEO and Representative Executive Officer Makoto Uchida said: "Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future. If realized, I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands. Together, we can create a unique way for them to enjoy cars that neither company could achieve alone."

Renault (RENA.PA), Nissan's largest shareholder, has indicated its willingness to consider the deal but will carefully evaluate the implications. Meanwhile, Taiwan’s Foxconn had explored acquiring Nissan to expand its EV manufacturing business but paused its efforts after discussions with Renault.

Following reports of the merger, Honda's shares rose 3.8%, Nissan gained 1.6%, and Mitsubishi Motors increased by 5.3%. The Nikkei benchmark also closed up 1.2%.