Japanese automakers Honda Motor Co. and Nissan Motor Co. are reportedly preparing to enter merger negotiations in an effort to bolster their competitiveness amid mounting pressure in the global automotive industry. According to a report from Nikkei Asia, the two companies aim to form a unified entity under a holding company structure, potentially incorporating Mitsubishi Motors-in which Nissan already holds a 24% stake.
The combined enterprise, should the negotiations succeed, would produce over 8 million vehicles annually, positioning the group among the world's largest automakers. However, the output would still fall short of rivals such as Toyota Motor Corp., which sold 11.2 million vehicles in 2023, and Germany's Volkswagen, which reported 9.2 million units sold last year.
The potential merger highlights growing urgency among Japanese automakers to adapt to the rapidly evolving electric vehicle (EV) market, where companies such as Tesla and China's BYD are capturing increasing market share. "As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths," both companies reiterated in separate statements. Honda clarified that the Nikkei report "was not released by our company" but did not deny its claims.
The merger discussions come at a critical time for Nissan, which faces significant financial challenges. The automaker's net earnings reportedly dropped over 90% year-over-year in mid-2024, forcing it to slash its annual operating profit forecast by nearly 70%. Analysts suggest Nissan may struggle to survive independently beyond the next year unless bolstered by a strategic partnership or acquisition.
Honda, on the other hand, has shown greater stability, supported by its evolving EV roadmap. The company plans to introduce its new Honda Zero EV platform next year, alongside the Prologue SUV, an electric model built in collaboration with General Motors. Meanwhile, Nissan has been slower to capitalize on its early lead in the EV market. Despite being a pioneer with its 2011 Leaf, Nissan has introduced only one additional EV-the Ariya-in recent years, a fact critics say undermined its competitive edge.
The EV landscape has grown increasingly uncertain as demand has plateaued in key markets, even as Chinese manufacturers dominate regions like East and Southeast Asia. Japanese automakers have been slow to match the aggressive expansion strategies of their Chinese counterparts, prompting industry experts to call for deeper partnerships to pool resources and cut costs.
The two Japanese firms already laid groundwork for closer collaboration earlier this year by announcing plans to jointly develop EV technology, software, and components. Both companies are also reportedly seeking to bring Mitsubishi into the fold, a move reminiscent of previous partnerships in Japan's electronics industry, such as Konica Minolta and JVCKenwood.
Market reaction to the merger report was swift. U.S.-traded shares of Honda rose approximately 2% on Tuesday, while Nissan's over-the-counter shares surged more than 11%, signaling investor optimism about the potential deal.
