As many as three Japanese automakers are set to merge, effectively creating the world’s third largest automaker. Just days after Nissan’s future was cast in doubt, news emerged that Honda and Nissan will merge, possibly bringing Nissan-controlled Mitsubishi with it. This startling news is based on a “memo of understanding” between the three based on a strategic partnership and potential business integration. However, the deal looks certain to conclude as early as 2026, according to published reports.
Business Framework
Based on the potential integration, the two main automakers would form a new auto group, one that would only trail Toyota and Volkswagen in size. The proposal aims to achieve combined sales of 30 trillion yen ($191 billion) and an operating profit exceeding 3 trillion yen. The agreement should enable the companies to consolidate operations, increase competitiveness, and respond better to BYD and Tesla, two companies that dominate the EV market.
Mitsubishi is studying the deal and will formally let the parties know by the end of January 2025 what direction they will take. With Mitsubishi in the mix, the united automotive group would have combined global sales of 8 million annual units, based on current sales. Thus, the new entity would move past Hyundai and Kia for third place.
Under the proposed framework, Honda and Nissan would finalize merger talks by June 2025, with a joint holding company established by August 2026. Shares of both Honda and Nissan would be delisted, and Honda, as the larger entity with a market capitalization four times that of Nissan, will appoint most of the board members.
Rising Competition
The merger underscores the growing threat from Chinese automakers and the technological trends of electrification and autonomous driving. Both Honda and Nissan have experienced declines in sales, particularly in China, due to increasing competition from domestic brands offering innovative and affordable electric vehicles.
In the US market, where both companies have a strong presence, Nissan has seen double-digit sales declines some months, even as certain competitors have gained. An aging fleet, lack of hybrid models, and minimal discounting have hurt sales.
U.S. Policy Concerns
The merger could face challenges from the incoming U.S. administration led by President-elect Donald Trump, who has signaled a potential rollback of EV-friendly policies and the imposition of tariffs on imported vehicles. Both Nissan and Honda have manufacturing plants in North America, and any policy changes could significantly impact their operations.
Industry Reactions
Surveying the industry, analysts are weighing in on this historic hookup. Those reactions are mixed Industry analysts have offered mixed reactions to the merger:
Jessica Caldwell, Edmunds: “A merger would be a long-term strategy, not a solution to any short-term challenges either company is facing. Both Nissan and Honda are positioning themselves for the future, which will be defined by electrification and autonomous technology.”
Tang Jin, a senior principal research with Mizuho Bank, Tokyo noted, “Honda has a unique, technology-centric culture with strengths in powertrains, so there should be some internal resistance to the merger with Nissan, a competitor with a different culture that is now faltering.
“Honda itself doesn’t have such abundant management resources. It faces a major challenge of how it can accelerate its shift to electrification by making money from hybrids and motorcycles. Nissan, on the other hand, has no choice.
“The car industry is currently undergoing rapid changes … so if the two companies cannot make decisions and execute them in unison and at speed, they may not be able to keep up with the changes.”
Don Bruce, University of Tennessee Boyd Center: “Nissan being an established player, obviously, they’re critical to the Tennessee automotive sector. Honda’s involvement could bring significant promise to this region’s economy.”
Financial Performance and Projections
Shares of Honda, Nissan, and Mitsubishi Motors rose following the announcement, with gains of 3.8-, 1.6-, and 5.3-percent, respectively. Despite recent financial challenges—including a 20 percent production cut and 9,000 global layoffs by Nissan—the companies seem optimistic about the potential benefits of the merger. Notably, Honda’s relatively stable financial base, supported by its motorcycle and hybrid vehicle segments, positions it as the dominant partner in the integration.
Merger: Looking Ahead
This potential merger represents a landmark shift in the global automotive landscape, bringing together three major Japanese automakers to combat mounting challenges from new industry players and changing consumer demands. Thus, with a focus on electrification, autonomous driving, and global scale, the partnership aims to redefine the competitive dynamics of the automotive sector.
Sources
Snider, M. (2024, December 17). Honda and Nissan reportedly in merger talks to bolster automakers for EV future. USA Today.
Writers, S. (2024, December 18). Experts’ comments on talks between Honda and Nissan to deepen ties. Reuters.
Lawrence, E. D. (2024, December 23). Honda, Nissan merger ‘like two weak swimmers helping each other’; analysts see risks. Detroit Free Press.
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