In a move that could fundamentally reshape Japan’s automotive landscape, Honda Motor and Nissan Motor are in talks to deepen their collaboration, including the possibility of a full-fledged merger.
The discussions between the two Japanese giants, which are the country’s second and third-largest automakers respectively, highlight the intense upheaval facing the global auto industry. Carmakers are grappling with the expensive technological shift towards electrification, political and economic uncertainties, and the rapid rise of Chinese competitors.
By combining forces, Honda and Nissan hope to gain the scale and resources necessary to navigate these immense pressures. A merged entity could become the world’s third-largest automaker group, behind industry leader Toyota and Germany’s Volkswagen.
“Moving forward in EVs is expensive, and some of the smaller players have to figure out how to pay for it,” said Jessica Caldwell, executive director of insights at market research firm Edmunds. “And it’s harder than ever now, because sales of EVs are growing more slowly than people had expected just a few years ago.”
Deepening Existing Collaboration
The potential merger builds on an existing collaboration between Honda and Nissan that began earlier this year. In March 2024, the two companies announced they would explore a strategic partnership, particularly in the development of electric vehicles.
Over the past several months, these discussions have expanded to include the possibility of creating a new holding company under which both automakers would operate. Nissan and Honda are expected to sign a memorandum of understanding within the next week to formally begin talks on the details of this potential merger.
Mitsubishi Motors, in which Nissan holds a large stake, is also expected to be considered for inclusion in the new group, according to reports.
Challenges Ahead
Automotive mergers, however, have a mixed track record of success. Past examples like the DaimlerChrysler union and the more recent Fiat Chrysler-PSA merger have shown that expected synergies and efficiencies are not always realized.
Nissan’s own alliance with French automaker Renault, which has been in place for over two decades, has also faced challenges in achieving the level of growth and profitability that was originally envisioned. Last year, the two companies agreed to take steps to unwind parts of their partnership.
Industry Transformation Driving Change
The potential Honda-Nissan merger is being driven by the sweeping changes transforming the global automotive industry. Automakers are under pressure to invest heavily in electric vehicles, autonomous driving technologies, and other innovations to keep pace with evolving consumer preferences and environmental regulations.
At the same time, the rise of Chinese EV makers like BYD, Great Wall, and Nio has disrupted the market, eating into the shares of established players from the U.S. and Japan.
Honda and Nissan, in particular, have lagged behind their rivals in the shift to electric vehicles. While Toyota has maintained its position as the market leader in Japan, Honda and Nissan have struggled to keep up with the rapid growth of hybrid and fully electric models.
Potential Benefits of a Merger
A merged Honda-Nissan entity could benefit from combining their respective strengths. Honda has a strong portfolio of fuel-efficient hybrid vehicles, while Nissan was an early pioneer in electric cars and has several popular EV models, including the Sakura minivehicle offered in Japan.
Additionally, Nissan could help Honda build out its global supply chain for batteries and other EV components, while Honda’s expertise in areas like engine development could also prove valuable.
The scale of the combined company would also give it more bargaining power with suppliers and enable greater investment in research and development for the technologies needed to compete in the rapidly evolving auto industry.
Conclusion – Honda and Nissan
As the global automotive landscape undergoes a profound transformation, Honda and Nissan are exploring a merger that could create one of the world’s largest automaker groups. The discussions are driven by the need for scale, resources, and technological capabilities to compete against rising Chinese EV makers and adapt to the industry’s shift towards electrification.
While the path ahead is not without challenges, the potential Honda-Nissan merger represents a bold move by two of Japan’s automotive giants to secure their future in an increasingly competitive and rapidly changing global market.