To explore the possibility of Mitsubishi participation, involvement & synergy sharing
In a landmark development for the global automotive industry, Honda and Nissan, two of Japan’s leading automakers, have announced plans to merge, potentially creating the world’s third-largest auto group by vehicle sales. The integration, which includes Mitsubishi Motors, aims to achieve significant synergies amid growing competition from electric vehicle manufacturers and Chinese automakers.
Formation of a Joint Holding Company
Honda and Nissan have signed a memorandum of understanding (MoU) to initiate discussions on a business integration, which could result in the establishment of a joint holding company by August 2026. The holding company would oversee combined operations with a target of achieving 30 trillion yen ($191 billion) in sales and more than 3 trillion yen in operating profit. Shares of both companies would be delisted as part of the integration.
Mitsubishi Motors, in which Nissan holds a significant stake, is also expected to join the new entity. The combined group’s sales are projected to exceed 8 million vehicles annually, surpassing South Korea’s Hyundai and Kia to secure the third spot globally, behind Toyota and Volkswagen.
Strategic Response to Market Challenges
This merger marks one of the most significant shifts in the global auto industry since Fiat Chrysler Automobiles and PSA Group united to form Stellantis in 2021. The alliance comes as Honda and Nissan face increasing pressure from Tesla and nimble Chinese automakers like BYD, which dominate the EV and hybrid car markets.
Honda CEO Toshihiro Mibe emphasized the urgency of adapting to the rapidly evolving automotive landscape. “The rise of Chinese automakers and new players has changed the car industry quite a lot,” Mibe said during a press conference in Tokyo. “We have to build up capabilities to fight with them by 2030, otherwise we’ll be beaten.”
Merger Timeline and Governance Structure
Talks are expected to conclude by June 2025, with Honda taking a leading role in the governance of the holding company. The company, which boasts a market capitalisation of over $40 billion, will appoint the majority of the board members. Nissan, valued at approximately $10 billion, will also play a key role in shaping the new organisation.
Recent Challenges and Collaborative Efforts
Both automakers have faced headwinds in key markets. Nissan recently announced a 20% reduction in global production capacity and a plan to cut 9000 jobs after a steep decline in sales in China and the United States. Similarly, Honda reported weaker-than-expected earnings, citing challenges in China, where local EV brands such as BYD have gained significant market share.
The two companies have been collaborating on electrification and software development since March 2023. In August, the scope of their partnership expanded to include Mitsubishi Motors, highlighting their commitment to shared innovation.
Implications for the Industry
The proposed merger reflects a broader trend of consolidation in the automotive sector as companies grapple with rising costs associated with EV development and the need for advanced software integration. By pooling resources, Honda and Nissan aim to enhance their competitiveness and establish a stronger foothold in the global market.
While the merger promises significant opportunities, it also raises questions about integration challenges and potential cultural differences between the two storied Japanese brands. Industry analysts will closely monitor the progress of these discussions as the companies work toward creating a new powerhouse in the automotive world.
