Honda and Nissan are embarking on discussions to merge, aiming to establish the world’s third-largest automotive group amid rising competition from Chinese manufacturers. On December 23, 2024, the two automakers announced they had agreed to enter formal talks, citing aspirations to leverage shared platforms and research and development (R&D) expenses to achieve cost synergies exceeding 1 trillion yen ($6.4 billion). CEO Toshihiro Mibe of Honda emphasized the urgency of the merger as both companies face formidable challenges, particularly from well-established electric vehicle (EV) makers such as BYD and Tesla.
The merger, if successful, would reshape the automotive industry significantly, increasing Honda's and Nissan's leverage to compete against the swift expansion of their Chinese rivals, which have been capturing market share with innovative EVs. Both automakers have been grappling with declining profits; Nissan recently reported its net profit dropped by 94 percent, leaving its market capitalization at just $10 billion. Honda, too, faced setbacks, recording a 15 percent fall in quarterly revenue.
The two companies are targeting over 3 trillion yen (approximately $20 billion) operating profit, anticipating the full effect of synergies will take time to materialize—potentially not until after 2030. Vincent Sun, a senior analyst at Morningstar, warned, “Both companies lack compelling EV offerings, and the combined entity would still face the challenge of a new EV model pipeline and R&D in technology.”
The merger talks highlight the broader shifts occurring within the global auto market as it transitions from fossil fuel reliance to electric vehicles. Both Honda and Nissan have underwhelming portfolios when it includes compelling EVs. Although Nissan had pioneered the Leaf, its ARIYA model aimed to compete with Tesla’s Model Y faced production issues, spotlighting the hurdles they face on the road to electrification.
While both companies have substantial manufacturing capabilities, their footprint within the U.S. is noteworthy; Honda operates 12 facilities, whereas Nissan has three. Raising their manufacturing presence within the U.S. may alleviate the financial burden of potential import tariffs from the U.S. government, especially as the political narrative surrounding manufacturing reshapes under incoming economic policies. President-elect Trump has been vocal about imposing tariffs to encourage foreign automakers to produce domestically.
Nissan’s struggles have led to significant job cuts globally and the closure of some manufacturing plants. This merger could yield benefits through collaborative technological advancements, but analysts are skeptical about immediate gains, particularly as both automakers remain slow to pivot toward electric vehicles. “The automotive industry holds a unique status in Japan,” said one industry executive commenting on potential challenges Foxconn may face should they proceed with other acquisition efforts, thereby overshadowing the Honda-Nissan talks.
Foxconn, Taiwan’s electronics giant, has been eyeing Nissan, reportedly seeking operational control by acquiring Renault’s stake. Foxconn’s aggressive push to expand within the EV market could change the dynamics of the impending Honda-Nissan marriage. If such acquisitions transpire, it could integrate unique supply chains and stimulate competition within the Japanese auto market. Meanwhile, both Honda and Nissan remain preoccupied by revamping their businesses to reclaim lost ground.
Finalizing the merger could reshape the automotive sector significantly, fostering resilience against external economic pressures, including tariffs likely to arise under Trump’s administration. The timeline indicates ambitions to formalize this deal by August 2026. Analysts and industry insiders maintain close watch on these developments, stressing the deal’s long-term viability depends significantly on various internal and external factors.
The conversation surrounding the Honda-Nissan merger is part of Japan’s broader effort to remain competitive on the global stage. With the risk of becoming overshadowed by their electric counterparts, they face two significant challenges: establishing credible EV offerings and effectively managing their operations amid consolidation trends likely to continue shaping the automotive industry.
