The Japanese auto industry is on the cusp of a major transformation. Honda and Nissan, two of Japan’s largest automakers, announced merger talks aiming for completion by 2026. This potential union signals a strategic response to the growing dominance of Chinese electric vehicle (EV) manufacturers in the global market. The merged entity would become the world’s third-largest auto group, trailing only Toyota and Volkswagen.
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Honda and Nissan logos are displayed in this illustration taken, June 5, 2023.
A Strategic Alliance in the Face of Intense Competition
This landmark merger is driven by the need to compete with industry giants like Tesla and rapidly expanding Chinese EV makers such as BYD. By combining resources and achieving greater scale, Honda and Nissan aim to navigate the challenges posed by electrification, autonomous driving, and shifting market dynamics. Smaller Mitsubishi Motors, partially owned by Nissan, is also considering joining the alliance, with a decision expected by January’s end.
The CEOs of all three companies, in a joint press conference, underscored the significant impact of Chinese automakers and emerging players on the industry landscape. Honda CEO Toshihiro Mibe emphasized the necessity of building capabilities to compete effectively by 2030 to avoid being overtaken. The merger aims to achieve combined sales of 30 trillion yen ($191 billion) and an operating profit exceeding 3 trillion yen.
Merger Details and Timeline
Nissan CEO Makoto Uchida, Honda CEO Toshihiro Mibe and Mitsubishi Motors CEO Takao Kato attend a joint news conference in Tokyo, Japan June 5, 2023.
The companies plan to finalize negotiations by June 2025, establish a holding company by August 2026, and subsequently delist both companies’ shares. Honda, with a market capitalization significantly larger than Nissan’s, will hold the majority of board seats. The inclusion of Mitsubishi Motors would boost the combined group’s global sales to over 8 million vehicles, surpassing Hyundai and Kia.
This merger builds upon existing collaborations between Honda and Nissan in areas like electrification and software development, which expanded to include Mitsubishi Motors in August.
Addressing Challenges and Future Outlook
Recent financial struggles for both Nissan and Honda, particularly in the crucial Chinese and U.S. markets, highlight the urgency of this strategic move. While Nissan has announced job cuts and production capacity reductions, Honda has faced declining sales in China. However, Honda CEO Mibe clarified that the merger is not a rescue of Nissan, emphasizing the importance of Nissan’s business turnaround.
Former Nissan Chairman Carlos Ghosn, center, looks on after an interview in Beirut, Lebanon February 8, 2023.
The success of this ambitious merger remains to be seen. Former Nissan Chairman Carlos Ghosn expressed skepticism, citing a lack of complementarity between the two automakers. Meanwhile, Renault, Nissan’s largest shareholder, is open to discussing all options. Other players, such as Foxconn, have also expressed interest in the Japanese auto market. Despite these challenges, the planned merger represents a significant development in the global automotive industry, poised to reshape the competitive landscape and accelerate the transition to electric vehicles. The positive market response, with share prices of all three companies rising following the announcement, reflects investor optimism in the potential of this historic alliance.
