Japanese auto-merger: Nissan, Honda team-up to counter challenges in EV era

Japanese automakers Honda and Nissan have announced plans to work toward a merger, forming the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.

The two companies said they had signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors also had agreed to join the talks on integrating their businesses.

Honda's president, Toshihiro Mibe, said Honda and Nissan will pursue unifying their operations under a joint holding company. Honda will initially lead the new management, retaining the principles and brands of each company.

The aim is to have a formal merger agreement by June and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.

No dollar value was given and the formal talks are just starting, Mibe said.

There are “points that need to be studied and discussed,” he said. “Frankly speaking, the possibility of this not being implemented is not zero.”

Automakers in Japan have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time.

A merger could result in a behemoth worth more than $50 billion based on the market capitalization of all three automakers.

Together, Honda, Nissan and Mitsubishi would gain scale to compete with Toyota Motor Corp. and with Germany’s Volkswagen AG. Toyota has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.

Severe situation

News of a possible merger surfaced earlier this month, with unconfirmed reports saying that the talks on closer collaboration partly were driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan by buying shares from the Japan's company's other alliance partner, Renault SA of France.

Nissan's CEO Makoto Uchida said there had been no direct approach to his company from Foxconn. He also acknowledged that Nissan's situation was “severe.”

Even after a merger Toyota, which rolled out 11.5 million vehicles in 2023, would remain the leading Japanese automaker.

If they join, the three smaller companies would make about 8 million vehicles. In 2023, Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million.

Nissan, Honda and Mitsubishi announced in August that they would share components for electric vehicles like batteries and jointly research software for autonomous driving to adapt better to dramatic changes centred around electrification, following a preliminary agreement between Nissan and Honda set in March.

Nissan has struggled following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, allegations that he denies. He eventually was released on bail and fled to Lebanon.

Speaking Monday to reporters in Tokyo via a video link, Ghosn derided the planned merger as a “desperate move.”

From Nissan, Honda could get truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.

Nissan also has years of experience building batteries and electric vehicles, and gas-electric hybrid powertrains that could help Honda in developing its own EVs and next generation of hybrids, he said.