Nissan and Honda are currently in preliminary discussions regarding a potential merger between the two car manufacturers, which would result in the creation of a $52 billion Japanese powerhouse, as per individuals familiar with the situation.
The companies are exploring the possibility of merging in order to enhance their competitiveness in a landscape where traditional carmakers are facing challenges from rapidly-growing Chinese electric-vehicle manufacturers and sluggish consumer demand for EVs.
While the discussions between Nissan and Honda are in the early stages, there are concerns about potential political backlash in Japan due to the merger potentially leading to significant job cuts at two of the country’s most iconic car brands.
In March, Nissan and Honda had announced their collaboration to develop EVs and have since intensified their talks amidst uncertainties surrounding the impact of Donald Trump’s return as US president on the automotive industry.
If the merger were to happen, the combined company would rank as the world’s third-largest carmaker based on last year’s sales volumes, trailing behind Toyota and Volkswagen, which would provide the scale necessary to compete with Tesla and China’s BYD.
Nissan recently unveiled a turnaround plan involving significant job cuts and cutbacks in global production capacity in response to financial challenges, while Honda and Nissan have previously agreed to jointly develop EVs and software by the end of the decade.
The potential merge could also give the enlarged company a substantial US manufacturing presence to potentially mitigate the impact of proposed tariffs on imports from Mexico by Trump and navigate potential regulatory changes affecting EV adoption in the US.
The combination of Nissan’s market value, manufacturing capabilities in the US, and attractiveness as an acquisition target for non-Japanese buyers have made the company an appealing prospect for a merger scenario.
A potential merger between Nissan and Honda would have implications for Mitsubishi Motors, which Nissan holds a significant stake in, potentially incorporating it into the expanded entity with combined annual production capabilities.
As the talks continue, the two companies would need to address the challenge of reconciling their distinct corporate cultures. The Japanese government had previously floated the idea of a Nissan-Honda merger in 2020, seeing it as a strategic move to bolster the competitiveness of domestic carmakers against Chinese rivals in the EV and software segments.
In light of these developments, Renault has expressed openness to divesting a portion of its shares in Nissan to Honda as part of a broader restructuring of their longstanding alliance, which saw Renault reorganize its shareholding in Nissan last year.
