Japanese automakers Nissan Motor and Honda Motor are reportedly in discussions regarding a potential merger The Nikkei newspaper. The move, which could reshape the global automotive landscape, aims to improve their ability to compete in an industry that is rapidly shifting towards electric vehicles, autonomous technology and intensifying competition from Chinese automakers and Tesla .
The report suggests that the two companies are considering operating under a holding company, with plans to formalize their intentions through a memorandum of understanding in the near future. Additionally, the potential merger could bring Mitsubishi Motors, in which Nissan holds a 24% stake, under the same corporate umbrella.
If realized, the combined Nissan-Honda-Mitsubishi venture would result in annual sales of more than 8 million vehicles, making it one of the largest automakers in the world. While significant, this figure would still be lower than Toyota Motor's 11.2 million vehicles sold in 2023 and Volkswagen's 9.2 million sales in the same year.
Collaboration amid industry upheaval
Neither Honda nor Nissan have confirmed the news. In statements, both companies indicated that they are exploring possibilities for deeper collaboration. “The reported content was not released by our company,” Honda said, adding: “As announced in March of this year, Honda and Nissan are evaluating various opportunities to leverage each other's strengths. Updates will be shared with interested parties at the appropriate time”.
This news follows an earlier strategic partnership between the two automakers, which focused on sharing automotive components and software to reduce costs and streamline operations. Such collaboration reflects the growing need for automakers to pool resources as they face increasing pressure to innovate in the face of technological revolution and intensifying global competition.
If the merger goes ahead, it would mark the largest auto deal since Fiat Chrysler merged with French group PSA to form Stellantis in January 2021.
Reason for the merger
Industry analysts and consultants have long advocated auto industry consolidation as a means to manage skyrocketing development costs for electric and autonomous vehicles. With Chinese automakers rapidly gaining market share in key regions and Tesla maintaining its dominant position in the all-electric vehicle segment, traditional automakers are under enormous pressure to adapt.
A merger between Nissan and Honda could allow the companies to share research and development expenses, streamline supply chains and realize economies of scale. This would also allow automakers to present a united front in the increasingly competitive global market, particularly in the race to produce affordable electric vehicles.
Market response
The potential merger has already triggered significant market activity. U.S.-listed Honda shares rose about 1% on Tuesday, while Nissan's OTC shares rose more than 11%. The jump in Nissan shares comes as the company continues its restructuring efforts, which have included refocusing on profitability and cutting costs after years of financial challenges.
A strategic pivot
The merger negotiations represent a crucial moment for both companies. Nissan, once a global leader in electric vehicle innovation with its Leaf model, has struggled to maintain its competitive edge in recent years. Meanwhile, Honda has actively pursued advances in electric and hydrogen fuel cell technology but has faced challenges in scaling production to meet growing demand.
By pooling resources, the two automakers could accelerate the transition to cleaner-energy vehicles and improve their ability to compete with established players like Toyota and Volkswagen, as well as new Chinese entrants.
The road ahead
While the merger is not confirmed, the implications of such a union could be profound for the global auto industry. If successful, the new entity could compete in size and technological capabilities with the world's largest automakers, positioning itself as a formidable competitor in a rapidly evolving market.
As the automotive landscape continues to change, mergers and strategic alliances are becoming essential tools for survival and growth. Whether or not this merger comes to fruition, it highlights the growing urgency for traditional automakers to adapt to the challenges of a rapidly evolving industry.
