In a groundbreaking move for the global automotive industry, Honda and Nissan, two of Japan’s most prominent automakers, have announced plans to merge. This merger, which will also potentially involve Mitsubishi Motors, is set to create one of the largest automotive groups in the world, aiming to become the third-largest by vehicle sales. With growing competition from electric vehicle (EV) manufacturers and Chinese automakers, the collaboration is expected to yield significant synergies that will help the companies navigate the evolving market landscape.
As part of this integration, Honda and Nissan have signed a memorandum of understanding (MoU) to explore the possibility of establishing a joint holding company. The goal is to have this holding company in place by August 2026, which would oversee the combined operations of both companies. The combined entity aims to generate sales of 30 trillion yen (approximately $191 billion) and operating profits exceeding 3 trillion yen. Both Honda and Nissan’s shares will be delisted as part of this agreement. Mitsubishi Motors, which is partially owned by Nissan, is also expected to join the new conglomerate, adding further strength to the group. The merger will position the combined sales of the new entity to exceed 8 million vehicles annually, surpassing Hyundai and Kia to claim the third spot globally, trailing only Toyota and Volkswagen.
This merger comes in response to the mounting pressures faced by both Honda and Nissan in the face of the rapid growth of electric vehicles and the aggressive expansion of Chinese automakers, such as BYD. Tesla’s dominance in the EV space has also intensified competition. Honda CEO Toshihiro Mibe acknowledged the need for adaptation, stating that the rise of Chinese brands and new players had significantly altered the automotive industry. He emphasized the urgency for the company to enhance its capabilities and strengthen its position in the market by 2030, or risk falling behind.
The merger discussions are expected to be completed by June 2025, with Honda taking a leading role in the governance of the new holding company. Honda, with a market capitalization of over $40 billion, will appoint the majority of the board members. Nissan, valued at approximately $10 billion, will also have a substantial role in shaping the new organization. This governance structure is designed to leverage Honda’s larger market cap while incorporating Nissan’s experience and influence within the new entity.
Both Honda and Nissan have faced several challenges in their key markets. Nissan recently announced a 20% reduction in global production capacity and plans to cut 9,000 jobs following a decline in sales, particularly in China and the United States. Similarly, Honda has experienced weaker-than-expected earnings, partly due to the rise of local EV brands such as BYD in China, which has captured a significant market share. To address these challenges, Honda and Nissan have been collaborating on electrification and software development since March 2023. Their partnership was further expanded in August to include Mitsubishi Motors, reflecting their commitment to innovation and the development of shared technologies.
This proposed merger is part of a broader trend of consolidation in the automotive sector, driven by the increasing costs associated with developing EVs and the need for advanced software integration. By pooling their resources, Honda and Nissan aim to enhance their competitiveness and strengthen their position in the global automotive market. This merger could reshape the industry, creating a powerful new entity capable of competing more effectively with established global players.
While the merger offers numerous opportunities, it also raises concerns about the challenges of integration, especially with potential cultural differences between the two companies. Honda and Nissan have a long history and distinct brand identities, and aligning their operations will be a complex process. Industry analysts will be closely monitoring the progress of this merger as it unfolds, particularly in regard to how the companies manage their integration and navigate the competitive pressures of the rapidly evolving automotive landscape.
