Honda & Nissan discussing potential merger that would form world's 3rd largest car company: Reports

Japanese carmakers Honda and Nissan are reportedly discussing a potential merger that, if carried out, would create one of the world's largest automobile companies.

Ongoing cooperation

Nikkei reported that Honda and Nissan have been discussing possible partnerships since March 2024, and will soon sign a memorandum of understanding.

The report drew on “sources close to the matter”, saying that Honda and Nissan were contemplating forming a holding company under which both would operate.

The arrangement could also eventually include Mitsubishi Motors, for which Nissan is currently the largest shareholder.

Nikkei reported that the three companies would form the world’s third-largest automotive group, with combined sales of over eight million vehicles.

The basis of the merger appears to be both companies’ efforts to transition to more energy-efficient technologies.

Honda is known for its hybrid vehicles, and in 2009, Nissan launched the first mass-market electric vehicle, the Leaf.

The BBC reports that the potential merger has not been confirmed by either company, but that cooperation between them has been ongoing since March 2024.

In identical statements given to the BBC, the two companies said: "As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths."

Honda and Nissan had agreed to cooperate on EVs in March and then furthered their collaboration in August by including cooperation on batteries and other technologies.

Potential obstacles

BBC also reported that the deal will also have to overcome potential obstacles, such as political scrutiny in Japan, as a potential merger might include job cuts.

But according to the Financial Times (FT) Nissan is already under pressure, and cut 9,000 jobs in November.

FT reported that Nissan has been searching for an anchor investor for several months — an indication how the potential merger has come about.

Contradicting the BBC’s apprehension of political scrutiny, FT also reported that the Japanese government previously mooted a potential merger between the two companies as early as 2020.

Further complicating any potential merger is the role of Renault, which has had a 25-year partnership with Nissan.

The partnership has soured in recent years, most visibly seen in the flight of the partnership’s former CEO Carlos Ghosn from Japan.

Ghosn was at one time CEO of both Renault and Nissan, and was smuggled out of Japan in a music equipment crate in 2019 after being charged with misusing company funds.

Appealing purchase

FT reported that Renault was generally positive about a “stronger relationship” between Nissan and Honda.

Renault currently holds 35 per cent of Nissan's shares, while Nissan has a 15 per cent voting stake in Renault.

Nikkei speculated that Honda’s interest in Nissan reflects the shift in the global car market towards EVs, which are expected to comprise half of global new-car sales by 2035.

Japanese carmakers face competition from Chinese firms, most notably BYD.

FT also noted that Nissan has significant manufacturing capability in the United States, thought to be particularly appealing in case President-elect Donald Trump carries out his threat of global tariffs.

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