Chethana Janith, Jadetimes Staff
C. Janith is a Jadetimes news reporter covering science and geopolitics.
Top Japanese carmakers Nissan Motor and Honda Motor are understood to be exploring a blockbuster merger, as the two rival companies seek to stay competitive on the road to full electrification.
It is thought the prospective tie-up could create the world’s third-largest auto group by vehicle sales, with 8 million sales annually, according to Citi.
The merger report comes at a time when many auto giants are struggling to cope with increased global competition from bigger EV makers such as Tesla and China’s BYD.
Top Japanese carmakers Nissan and Honda Motor are reportedly exploring a major merger, stirring significant interest across the global automotive industry as the two rivals aim to stay competitive in the race toward full electrification.
According to reports from a leading Japanese business publication, Nissan and Honda are preparing to enter negotiations for a merger, with sources suggesting the companies could sign a memorandum of understanding soon. Mitsubishi Motors, in which Nissan holds a 24% stake, is also expected to be part of the discussions.
If finalized, this potential collaboration could create the third-largest automotive group globally by vehicle sales, with an estimated 8 million units sold annually. This would position the Nissan-Honda-Mitsubishi alliance just behind Toyota Motor and Volkswagen in terms of global sales.
In separate statements, Nissan and Honda have not confirmed or denied the reports, though talks are rumored to begin as early as next week.
This news comes at a time when major automakers are under pressure to compete with leading electric vehicle (EV) companies like Tesla and China’s BYD. Earlier this year, Nissan and Honda entered a strategic partnership to collaborate on producing essential EV components, further signaling their intent to strengthen their position in the evolving market.
Despite the promise of such a merger, challenges remain. Analysts have highlighted potential political scrutiny in Japan, particularly due to concerns about job reductions if the deal moves forward. Additionally, unraveling Nissan’s existing alliance with French automaker Renault is seen as a key hurdle.
Peter Wells, a professor specializing in business and sustainability at Cardiff Business School’s Centre for Automotive Industry Research, emphasized the significance of this potential merger. He noted that it could help the companies combine resources, reduce costs, and advance the development of future technologies.
“There’s been a lot of speculation about Nissan’s position over the past year,” Wells said. “It’s been working to recalibrate its relationship with Renault but has faced challenges in the market, at home, and with its product lineup. There are several red flags signaling the need for change. Whether this merger is the solution remains to be seen.”
Shares of Nissan soared almost 24% on Wednesday, notching the firm’s best trading day in at least 40 years, according to data firm FactSet. The firm’s Tokyo-listed stock price remains nearly 25% lower year to date.
Honda shares, meanwhile, slipped over 3% in New York.
Barriers to a Possible Merger
When asked whether a merger between Nissan and Honda could serve as an effective strategy to counter competition from Chinese EV makers, Peter Wells from Cardiff Business School described the deal as “a traditional solution.”
“My concerns would be that perhaps they have left it a bit late, that they don’t have the current technology, setup, or the right product to compete in their key markets,” Wells said.
“For Nissan in particular, they are out of step with the U.S. market. That’s their major concern, and they cannot fix that very quickly,” he added.
JPMorgan analyst Akira Kishimoto echoed similar sentiments regarding the challenges such a merger might face, describing the hurdles as “high.”
“At a minimum, we think Nissan needs to clarify where its particularly complex capital relationship with Renault, which involves the French government, will end up and also provide details on the restructuring proposal it announced,” Kishimoto said in a research note.
“We think Honda needs to show how it will manage major investments in battery electric vehicles and battery production in Canada,” he added.
JPMorgan stated that it would await concrete announcements from either company before further analysis.
‘Full-Scale Transformation of the Auto Industry’
“This tie-up is not entirely unexpected because they had already announced their partnership earlier this year,” said Lucinda Guthrie, executive editor at Mergermarket.
“Some reports suggest this development was prompted by an approach from Foxconn to Nissan. With this transaction, I wonder whether it will be a full-scale merger or more of a partnership,” she added.
Foxconn, a key supplier for Apple, reportedly approached Nissan about taking a stake, according to *Bloomberg*. The Taiwan-based company has been significantly increasing its investments in EVs in recent years. Foxconn has not yet commented on these reports.
Meanwhile, Honda recently explored the possibility of a partnership with General Motors but ultimately decided not to proceed. Guthrie noted that the consolidation talks between Honda and Nissan might follow a similar trajectory.
“It’s important to consider that any such merger would require the approval of the Japanese government, especially given the potential for job cuts. However, the larger question is how Japanese automakers plan to compete with the low-cost vehicles coming from China,” Guthrie said.
Citi analyst Arifumi Yoshida expressed mixed views on the potential merger, suggesting it could negatively impact Honda but benefit Nissan and Mitsubishi.
“Given Honda’s competitiveness in motorcycles and hybrid electric vehicles, as well as the strength of its brand, we believe it is well-positioned to take on rivals over the next 5-10 years,” Yoshida said in a research note.
Still, Yoshida acknowledged that the move could be seen as a strategic step “in anticipation of the full-scale transformation of the auto industry.”
Comments