Japanese automakers Honda and Nissan announced plans to merge, creating the world’s third-largest automaker by sales. This move comes as the automotive industry undergoes a significant transition away from fossil fuels. The two companies signed a memorandum of understanding on Monday, with smaller alliance member Mitsubishi Motors also agreeing to participate in integration talks. Honda’s president, Toshihiro Mibe, stated that the companies aim to unify operations under a joint holding company, with Honda initially leading management while maintaining the individual brands and principles of each company. The goal is to finalize a formal merger agreement by June 2024, completing the deal and listing the holding company on the Tokyo Stock Exchange by August 2026. While no dollar value was disclosed, Mibe acknowledged that the formal talks are just beginning and the possibility of the merger not being implemented remains.
Japanese automakers have lagged behind global competitors in electric vehicle development, prompting cost-cutting measures and efforts to regain lost ground. A merger would create a behemoth worth over $50 billion based on the combined market capitalization of the three companies, enabling them to better compete with Toyota Motor Corp. and Volkswagen AG. Toyota itself has technology partnerships with Mazda Motor Corp. and Subaru Corp. Reports of a potential merger surfaced earlier this month, fueled in part by speculation surrounding Taiwan’s Foxconn’s interest in Nissan. Nissan CEO Makoto Uchida denied any direct contact from Foxconn, but acknowledged the company’s “severe” situation.
Even with the merger, Toyota, which produced 11.5 million vehicles in 2023, would remain the leading Japanese automaker. The combined output of Honda (4 million), Nissan (3.4 million), and Mitsubishi Motors (over 1 million) would total approximately 8 million vehicles. The three companies announced in August a plan to share electric vehicle components and jointly research autonomous driving software, building on a preliminary agreement between Nissan and Honda from March.
Nissan has faced challenges following the 2018 arrest of its former chairman, Carlos Ghosn, on fraud charges. Ghosn, speaking via video link, criticized the planned merger as a “desperate move.” Industry analyst Sam Fiorani highlighted potential benefits for Honda, including access to Nissan’s truck-based SUVs, battery technology, and hybrid powertrain expertise. However, Nissan recently announced 9,000 job cuts and a 20% reduction in global production capacity following a quarterly loss. CEO Uchida implemented a 50% pay cut to address the company’s financial struggles. Despite a recent Fitch Ratings credit outlook downgrade, Nissan maintains a strong financial structure and substantial cash reserves. News of the potential merger resulted in significant share price increases for both Nissan and Honda.
The merger reflects a broader industry trend towards consolidation. Japanese Cabinet Secretary Yoshimasa Hayashi emphasized the need for Japanese companies to remain competitive in the rapidly evolving automotive market, highlighting the growing importance of battery technology and software.