Honda Motor Co. and Nissan Motor Co. are reportedly in early-stage discussions regarding a potential merger that could redefine the Japanese automotive sector and create a powerful competitor to Toyota Motor Corp. Sources cited by Bloomberg indicate the talks may involve options like a full merger, a capital partnership, or the establishment of a holding company to manage combined operations.
Shinji Aoyama, Honda’s Executive Vice President, confirmed that the company is exploring various strategic opportunities, including the possibility of merging. News of the talks led to a significant market reaction, with Nissan shares surging by 24% during early Wednesday trading, while Honda shares declined by 3.4%, according to Bloomberg.
One proposal reportedly under consideration involves the creation of a holding company to oversee the merged entities. This framework could also extend to Mitsubishi Motors Corp., a partner of Nissan, strengthening the collaboration further. However, insiders have emphasized that the discussions are preliminary and might not result in an agreement.
A successful merger would consolidate Japan’s automotive industry into two key groups: Honda, Nissan, and Mitsubishi on one side, and Toyota and its affiliates on the other. Such a move could enhance global competitiveness for Honda and Nissan, particularly as they face increasing pressure from electric vehicle (EV) leaders like Tesla and Chinese automakers.
Recent years have seen Honda and Nissan collaborating on EV batteries and software. Earlier in 2024, Honda’s CEO Toshihiro Mibe expressed openness to a capital partnership with Nissan, signaling a growing inclination toward deeper cooperation.
If the merger materializes, analysts expect it to benefit Nissan, which has been struggling financially and undergoing a stalled restructuring process. Bloomberg Intelligence senior analyst Tatsuo Yoshida noted that the merger could offer “short-term relief” for Nissan, while Pelham Smithers Associates analyst Julie Boote acknowledged potential challenges, such as overlapping operations between the two companies.
Together, Honda, Nissan, and Mitsubishi sold around 4 million vehicles globally in the first half of 2024, falling short of Toyota’s 5.2 million units. By consolidating resources, the trio could better position themselves to challenge Toyota’s dominance. Toyota, in contrast, has solidified its presence by investing in Subaru Corp., Suzuki Motor Corp., and Mazda Motor Corp.
Honda’s market capitalization of ¥6.8 trillion ($44.4 billion) is notably larger than Nissan’s ¥1.3 trillion but remains significantly lower than Toyota’s ¥42.2 trillion. This disparity underscores the competitive challenge the merged group would face.
Honda has recently struggled to match its rivals in developing advanced EV technologies, despite efforts to increase hybrid and electric vehicle production. Nissan, on the other hand, is seeking stability after partially unwinding its long-standing alliance with Renault. The automaker is reportedly open to Honda acquiring some of its shares to replace Renault as an equity partner.
While the merger is far from finalized, it signals a pivotal moment for Japan’s automotive industry. If successful, it could reshape the global automotive landscape and create a formidable player capable of competing with Toyota and other global leaders in the race toward electrification.
