Honda and Nissan have initiated plans to merge, potentially creating the world's third-largest automaker by sales. The announcement, made during a joint press conference, marks a significant step as both companies aim to navigate the severe challenges posed by the rapid transition to electric vehicles and fierce competition from companies like Tesla and BYD.
On Monday, Honda's president, Toshihiro Mibe, and Nissan's CEO, Makoto Uchida, confirmed they had signed a memorandum of understandings and would work toward forming a joint holding company by August 2026. Mibe stated, "We need to build up capabilities to fight ... otherwise we'll be beaten." This ambitious merger could realize combined sales of 30 trillion yen ($191 billion) and over 3 trillion yen ($19 billion) operating profit.
The impending collaboration follows previous discussions on sharing parts and technology, particularly concerning electrification and software development. By leveraging their strengths, Honda and Nissan hope to reduce costs and improve their competitive edge. "Current business models are being upended... it will come much faster," Mibe emphasized, underlining the urgency of their initiative.
Nissan, Japan’s third-largest automaker, has faced considerable challenges, including slumping profits and job cuts, with plans to eliminate 9,000 positions globally. The company reported a staggering 90% drop in net profit for the April-September timeframe, which has prompted significant restructuring measures.
The integration effort may also involve Mitsubishi Motors, which has been part of Nissan's strategic alliance. The future of Mitsubishi's involvement will be decided soon, as the company evaluates its position. If it joins, the newly formed entity could account for over 8 million vehicles sold annually, pushing past South Korea's Hyundai and Kia.
Industry analysts view this move as part of a broader trend of consolidation among automakers, especially as market dynamics shift due to the rise of electric vehicles (EVs). Japanese automakers, historically dominant car manufacturers, have struggled to keep pace with international competitors in the EV space. While Toyota remains the leader globally, Honda and Nissan face the risk of falling behind without the necessary scale to compete effectively.
Former Nissan Chairman Carlos Ghosn, now living as a fugitive, voiced skepticism about the merger. He described it as "a desperate move" reflecting Nissan’s panic amid financial struggles. Ghosn pointed out fundamental challenges, stating the two companies are not sufficiently complementary to bring about successful synergies.
The proposed merger talks come as the Japanese automotive industry undergoes intense scrutiny and pressure from China's growing automotive market. These shifts necessitate strategic partnerships to share research and development costs, which have ballooned due to the push for advanced technologies.
On the stock market, the news of the merger talks positively impacted shares for Nissan, Honda, and Mitsubishi Motors, which all experienced gains. Fuelled by speculation and market reactions, Nissan shares increased by 1.6% on the Tokyo Stock Exchange, with Honda shares climbing by 3.8%.
Despite the forward momentum, not all stakeholders share Mibe’s optimism. Analysts warn if Honda and Nissan do not achieve meaningful integration and operational efficiencies, the merger could merely constitute "a gathering of the weak," as market players struggle to adapt to rapid technological changes.
With increasing sales pressure and the impending economic realities following the pandemic, such strategic alignments among automakers may become more commonplace. Consolidation could symbolize an industry shift as companies pursue competitive advantages amid the rise of EV technology and consumer demand changes.
Overall, the merger talks reflect the desperation felt among traditional automakers as they seek to forge alliances capable of ensuring their long-term viability. With the market backing their efforts, there lies both hope and skepticism about the success of Honda and Nissan’s proposed integration.
