Honda and Nissan in merger talks to secure EV future

Japanese automakers Honda Motor and Nissan Motor have announced formal discussions on a potential merger, a move that could reshape the global automotive landscape. If successful, the merger would form the world’s third-largest automaker by sales, trailing only Toyota Motor and Volkswagen. The integration would fortify their position in the electric vehicle and software-driven future of the industry​​.

According to the AP, Honda and Nissan’s talks signal a strategic response to global pressures from rising EV competitors, including Tesla and Chinese automakers like BYD. Both companies are grappling with the immense costs of transitioning to electrification and the development of autonomous driving technologies. Reuters reported that Honda CEO Toshihiro Mibe characterized the industry’s shift as a once-in-a-century change, underscoring the urgency of the integration​​.

The merger could help the automakers achieve the scale necessary to compete in the global market. Honda’s strength in hybrid and internal combustion vehicles, particularly in the US, contrasts with Nissan’s expertise in EVs, where its early lead with the Nissan Leaf has since faded due to limited expansion. Analysts point to the complementary nature of their offerings as a potential advantage in addressing weaknesses in key markets like the US.

The proposed merger would create a combined entity with projected annual revenue of USD 191 billion and operating profits exceeding USD 20 billion. Together, Honda, Nissan, and potentially Mitsubishi Motors—Nissan’s smaller alliance partner—could produce more than 8 million vehicles annually. This output positions the group as a formidable player behind Toyota, which remains the leader with 11.5 million vehicles sold in 2023​​.

Honda’s market capitalization of USD 43 billion and financial stability stand in contrast to Nissan’s USD 10 billion valuation and ongoing struggles. Nissan has faced declining sales, profitability issues, and significant leadership challenges since the 2018 arrest of former chairman Carlos Ghosn. The merger is seen as a potential lifeline for Nissan, which has struggled to fund its dual objectives of producing gasoline-powered vehicles and investing in next-generation technologies​​.

The potential merger faces notable challenges. Honda and Nissan have starkly different corporate cultures. Honda’s origins as a motorcycle company have fostered a nimble and innovation-driven ethos, exemplified by its hybrid expertise and ventures in robotics and motorsports. In contrast, Nissan’s history is rooted in government-led industrialization and a global expansion strategy, making its corporate structure more traditional and hierarchical​.

Former Nissan chairman Ghosn, speaking from Lebanon, criticized the merger for lacking complementary synergies, while market observers have raised concerns about the challenges of integrating the two companies.

The merger discussions are not only a critical pivot for the companies but also for Japan’s automotive industry, which has lagged behind global competitors in EV and software innovation. WSJ reported that the Japanese government has expressed support for the talks, viewing the consolidation as essential to remaining competitive on the global stage​.

Honda and Nissan aim to conclude negotiations by mid-2025, with plans to form a holding company by 2026. Mitsubishi Motors is expected to decide on its involvement by January 2025. If successful, the merger could set a precedent for how legacy automakers adapt to a rapidly evolving industry​​.