Honda and Nissan, two of Japan's leading automotive manufacturers, are engaged in discussions regarding a potential merger. If completed, the merger would create the world's third-largest automaker by sales and significantly impact the global electric vehicle (EV) market, particularly in relation to competition with companies like Tesla and China's BYD.
The companies announced they had signed a Memorandum of Understanding (MOU) on March 15th to explore a business integration. A second MOU was signed on August 1st, further outlining the potential for joint research into fundamental technologies for next-generation software-defined vehicles (SDVs). The proposed structure involves establishing a joint holding company, which would be listed on the Tokyo Stock Exchange. Both Honda and Nissan would become wholly-owned subsidiaries of this new entity. The companies cited "dramatic changes in the environment surrounding both companies and the automotive industry" in their joint statement.
The merger is viewed as a strategic response to changes in the global automotive market, including the growth of EV manufacturers and increasing competition. The combined company is projected to generate revenue of over 30 trillion yen ($191.4 billion) and operating profits exceeding 3 trillion yen. "We hope Japanese companies will take steps to respond to these changes and take measures to survive and win amid international competition," said top government spokesman Yoshimasa Hayashi, highlighting the importance of “strengthening competitiveness in areas such as... batteries and in-vehicle software.”
Analysts suggest the potential tie-up is, in part, a consequence of Nissan's recent financial underperformance. The company recently announced significant job cuts and a reduction in global production capacity. Honda CEO Toshihiro Mibe acknowledged this, stating that while some may see the deal as Honda supporting Nissan, the merger is "based on the assumption that Nissan completes its turnaround action." He further emphasised, "If Nissan and Honda fail to stand on their own feet the business integration talks will not come to fruition." Nissan CEO Makoto Uchida, meanwhile, maintained that the talks do "not mean we have given up on a turnaround" but are about ensuring future competitiveness through partnerships.
Key factors influencing the merger discussions include the need for increased scale to compete in the development of new technologies, particularly in the EV sector. Honda CEO Toshihiro Mibe said the companies needed greater scale to compete in the development of new technologies in electric vehicles and intelligent driving. A business integration would give the companies an “edge that will not be possible under the current collaboration framework.” The deal would aim to "share intelligence and resources and deliver economies of scale and synergies while protecting both brands," he said. The companies also cite the changing competitive landscape, especially with the rise of Chinese EV makers like BYD, and the financial performance of Nissan in recent years as considerations. "Business has been especially tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles," the provided text notes. China also overtook Japan as the biggest vehicle exporter last year.
The integration is expected to create synergies across various operations. These include standardising vehicle platforms to reduce costs and improve development efficiency, integrating R&D functions to accelerate technological advancements, and optimising manufacturing facilities to improve capacity utilisation. The companies also anticipate benefits from streamlining supply chains, integrating back-office operations, and combining sales finance functions.
The companies have outlined a tentative timeline for the merger process. A board resolution and execution of the MOU are planned for December 23, 2024. A definitive agreement is expected in June 2025, followed by shareholder meetings in April 2026. If approved, the delisting of Nissan and Honda from the TSE is anticipated for the end of July-August 2026, with the new holding company listing in August 2026.
Under the proposed structure, Honda, the larger and more profitable of the two, will nominate a majority of the directors for the new holding company, including the chief executive. This suggests, as the provided text notes, that the merger is "unlikely to be a marriage of equals." Further details on the holding company's structure and management will be determined in the coming months. Former Nissan boss Carlos Ghosn, speaking from exile, said that Nissan turning to arch-rival Honda showed that they were in "panic mode", adding "Although the two companies might be able to 'find synergies for the future... I don't see anything obvious into this partnership or this alliance'."
The discussions between Honda and Nissan represent a significant development in the automotive industry. The potential merger will be subject to shareholder and regulatory approvals. If successful, the integration will create a major player in the global automotive market and impact the competitive landscape, particularly in the EV sector. As Peter Wells, professor at Cardiff Business School, noted, Nissan has "been struggling in the market, it's been struggling at home, it doesn't have the right product line-up." He added, "There are so many warning signs, so many red flags around Nissan at the moment that something had to happen. Whether this is the answer is another question."
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