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(AP) — Japanese automakers Honda and Nissan have announced plans to work toward a merger that would form the world’s third-largest automaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors Corp. also had agreed to join the talks on integrating their businesses.
Automakers in Japan have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time as newcomers like China’s BYD and EV market leader Tesla devour market share.
Honda’s president, Toshihiro Mibe, said Honda and Nissan will attempt to unify their operations under a joint holding company. Honda will lead the new management, retaining the principles and brands of each company. They aim to have a formal merger agreement by June and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.
No dollar value was given and the formal talks are just starting, Mibe said.
There are “points that need to be studied and discussed,” he said. “Frankly speaking, the possibility of this not being implemented is not zero.”
A merger could result in a behemoth worth more than $50 billion based on the market capitalization of all three automakers. Together, Honda, Nissan, and Mitsubishi would gain scale to compete with Toyota Motor Corp. and Germany’s Volkswagen AG. Toyota has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.
News of a possible merger surfaced earlier this month, with unconfirmed reports saying Taiwan iPhone maker Foxconn was seeking to tie up with Nissan by buying shares from the Japan company’s other alliance partner, Renault SA of France.
Nissan’s CEO Makoto Uchida said Foxconn had not directly approached his company. He also acknowledged that Nissan’s situation was “severe.”
Even after a merger Toyota, which rolled out 11.5 million vehicles in 2023, would remain the leading Japanese automaker. If they join, the three smaller companies would make about 8 million vehicles. In 2023, Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million.
“We have come to the realization that for both parties to be leaders in this mobility transformation, it is necessary to make a bold change rather than a collaboration in specific areas,” Mibe said.
Nissan, Honda, and Mitsubishi earlier agreed to share components for electric vehicles like batteries and to jointly research software for autonomous driving to adapt better to electrification.
Nissan has struggled following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, allegations that he denies. He eventually was released on bail and fled to Lebanon.
Speaking Monday to reporters in Tokyo via a video link, Ghosn derided the planned merger as a “desperate move.”
From Nissan, Honda could get truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and good off-road performance, Sam Fiorani, vice president of AutoForecast Solutions, told The Associated Press.
Nissan also has years of experience building batteries electric vehicles, and gas-electric hybrid powertrains that could help Honda in developing its own EVs and next generation of hybrids, he said.
But the company said in November that it was slashing 9,000 jobs, or about 6% of its global workforce, and reducing its global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million).
It recently reshuffled its management and Uchida, its chief executive, took a 50% pay cut while acknowledging responsibility for the financial woes, saying Nissan needed to become more efficient and respond better to market tastes, rising costs, and other global changes.
“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a wider customer base,” Uchida said.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing worsening profitability, partly due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves that amounted to 1.44 trillion yen ($9.4 billion).
Nissan’s share price also had fallen to the point where it is considered something of a bargain. On Monday, its Tokyo-traded shares gained 1.6%. They jumped more than 20% after news of the possible merger broke last week.
Honda’s shares surged 3.8%. Honda’s net profit slipped nearly 20% in the first half of the April-March fiscal year from a year earlier, as its sales suffered in China.
The merger reflects an industry-wide trend toward consolidation.
At a routine briefing Monday, Cabinet Secretary Yoshimasa Hayashi said he would not comment on details of the automakers’ plans, but said Japanese companies need to stay competitive in the fast-changing market.
“As the business environment surrounding the automobile industry largely changes, with competitiveness in storage batteries and software is increasingly important, we expect measures needed to survive international competition will be taken,” Hayashi said.
Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors also had agreed to join the talks on integrating their businesses. Honda will initially lead the new management, retaining the principles and brands of each company.
Following is a quick look at what a combined Honda and Nissan would mean for the companies, and for the auto industry.
An industry shakeup
The ascent of Chinese automakers is rattling the industry at a time when manufacturers are struggling to shift from fossil fuel-driven vehicles to electrics. Relatively inexpensive EVs from China’s BYD, Great Wall, and Nio are eating into the market shares of U.S. and Japanese car companies in China and elsewhere.
Japanese automakers have lagged behind big rivals in EVs and are now trying to cut costs and make up for lost time.
Nissan, Hond, and Mitsubishi announced in August that they will share components for electric vehicles like batteries and jointly research software for autonomous driving to adapt better to dramatic changes in the auto industry centered around electrification. A preliminary agreement between Honda, Japan’s second-largest automaker, and Nissan, third-largest, was announced in March.
A merger could result in a behemoth worth about $55 billion based on the market capitalization of all three automakers.
Joining forces would help the smaller Japanese automakers add scale to compete with Japan’s market leader Toyota Motor Corp. and with Germany’s Volkswagen AG. Toyota itself has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.
What would Honda need from Nissan?
Nissan has truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and good off-road performance, said Sam Fiorani, vice president of AutoForecast Solutions.
Nissan also has years of experience building batteries electric vehicles, and gas-electric hybrid powertrains that could help Honda in developing its own EVs and next generation of hybrids, he said.
“Nissan does have some product segments where Honda doesn’t currently play,” that a merger or partnership could help, said Sam Abuelsamid, a Detroit-area automotive industry analyst.
While Nissan’s electric Leaf and Ariya haven’t sold well in the U.S., they’re solid vehicles, Fiorani said. “They haven’t been resting on their laurels, and they have been developing this technology,” he said. “They have new products coming that could provide a good platform for Honda for its next generation.”
Why now?
Nissan said last month that it was slashing 9,000 jobs, or about 6% of its global workforce, and reducing global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million).
Earlier this month it reshuffled its management and its chief executive, Makoto Uchida, took a 50% pay cut to take responsibility for the financial woes, saying Nissan needed to become more efficient and respond better to market tastes, rising costs, and other global changes.
Fitch Ratings recently downgraded Nissan’s credit outlook to “negative,” citing worsening profitability, partly due to price cuts in the North American market. But it noted that it has a strong financial structure and solid cash reserves that amounted to 1.44 trillion yen ($9.4 billion).
Nissan’s share price has fallen to the point where it is considered something of a bargain. A report in the Japanese financial magazine Diamond said talks with Honda gained urgency after the Taiwan maker of iPhones Hon Hai Precision Industry Co., better known as Foxconn, began exploring a possible acquisition of Nissan as part of its push into the EV sector.
The company has struggled for years following a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets, allegations that he denies. He eventually was released on bail and fled to Lebanon.
Honda reported its profits slipped nearly 20% in the first half of the April-March fiscal year from a year earlier, as sales suffered in China.
More headwinds
Toyota made 11.5 million vehicles in 2023, while Honda rolled out 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million. Even after a merger, Toyota would remain the leading Japanese automaker.
All the global automakers are facing potential shocks if President-elect Donald Trump follows through on threats to raise or impose tariffs on imports of foreign products, even from allies like Japan and neighboring countries like Canada and Mexico. Nissan is among the major car companies that have adjusted their supply chains to include vehicles assembled in Mexico.
Meanwhile, analysts say there is an “affordability shift” taking place across the industry, led by people who feel they cannot afford to pay nearly $50,000 for a new vehicle. In America, a vital market for companies like Nissan, Honda, and Toyota, is forcing automakers to consider lower pricing, which will eat further into industry profits.