TOKYO (Reuters) – Honda and Nissan announced on Monday (23) that they have begun talks on a possible merger, in a historic move for Japan’s auto industry that highlights the threat that Chinese electric vehicle makers now pose to some of the best-known car manufacturers in the world.
The integration would create the world’s third-largest automotive group by vehicle sales, after Toyota and Volkswagen. It would also give both companies scale and a chance to share resources in the face of intense competition from Tesla and nimbler Chinese rivals such as BYD.
The merger of the two famous Japanese brands – Honda, Japan’s second-largest automaker, and Honda, its third – would mark the biggest shake-up in the global automotive sector since Fiat Chrysler Automobiles and PSA merged in 2021 to create Stellantis in a deal worth 52 billion dollars.
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Mitsubishi Motors, of which Nissan is a majority shareholder, was also considering participating, the companies said. The chief executives of the three companies held a joint press conference in Tokyo.
“The rise of Chinese automakers and new entrants has greatly changed the automobile industry,” Honda Chief Executive Toshihiro Mibe said at the press conference.
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“We have to develop capabilities to fight them by 2030, otherwise we will be defeated,” he said.
The two companies would target combined sales of 30 trillion yen ($191 billion) and operating profit of more than 3 trillion yen through the potential merger, they said.
They aim to complete negotiations around June 2025 and then establish a holding company by August 2026, when shares in both companies would be delisted.
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Honda has a market capitalization of over $40 billion, while Nissan is valued at around $10 billion.
Honda will appoint the majority of the holding company’s board members, according to the company.
The combination with Mitsubishi Motors would increase the Japanese group’s global sales to more than 8 million cars. The current third group is Hyundai and Kia from South Korea.
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Honda and Nissan are exploring ways to strengthen their partnership, including a merger, Reuters reported last week.
The two companies said in March they were considering cooperation in electrification and software development. They agreed to conduct joint research and extended the collaboration to Mitsubishi Motors in August.
Last month, Nissan announced a plan to cut 9,000 jobs and 20% of its global production capacity after sales plunged in the Chinese and US markets. Honda also reported worse-than-expected earnings due to falling sales in China.
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Like other foreign automakers, Honda and Nissan have lost ground in the world’s biggest market, China, to BYD and other local brands that make electric and hybrid cars with innovative software.
In a separate online press conference with the Foreign Correspondents’ Club of Japan on Monday, former Nissan chairman Carlos Ghosn said he did not believe the Honda-Nissan alliance would be successful, asserting that the two automakers are not complementary.
