On Monday, Japanese automakers Nissan and Honda announced that they have entered official talks to merge and create the world’s third-largest automaker by sales.
During a press conference, Honda CEO Toshihiro Mibe explained that the companies need greater scale to compete in developing new technologies for electric vehicles and intelligent driving. He stated that a business integration would give the companies an “edge that will not be possible under the current collaboration framework.”
The deal aims to share intelligence and resources, deliver economies of scale and synergies, while preserving both brands, he added.
A holding company will be formed as the parent company of both Honda and Nissan, listed on the Tokyo Stock Exchange. The larger Honda will nominate most of the board members of the integrated entity. The merged group has the potential to generate revenue of 30 trillion yen ($191.4 billion) and operating profit of over 3 trillion yen, he said.
The discussions will conclude by June 2025.
Mibe also noted that if the integration is approved, it will be a mid- to long-term project, with visible progress expected to be seen only after 2030.
Nissan’s strategic partner, Mitsubishi, has been invited to join the new group and will make a decision by the end of January 2025.
The companies are facing intense global competition in the EV market from rivals such as Tesla and China’s BYD.
The Nikkei newspaper first reported the proposed deal on December 17.
Nissan struggles
Following the initial report of a potential merger, Nissan’s shares spiked. Analysts believe the proposed tie-up is driven by Nissan’s financial underperformance and the restructuring of its long-standing partnership with France’s Renault.
In its most recent quarterly results, Nissan announced plans to cut 9,000 jobs and reduce its global production capacity by 20%.
Honda CEO Mibe addressed concerns on Monday, acknowledging that some of the company’s shareholders might view the deal as Honda supporting Nissan. However, he emphasized that the merger is “based on the assumption that Nissan completes its turnaround efforts.”
Mibe added, “If Nissan and Honda fail to stand on their own feet, the business integration talks will not come to fruition.”
Nissan CEO Makoto Uchida told reporters that the discussions about integration “do not mean we have given up on a turnaround” but are instead focused on securing the company’s future competitiveness.
He explained, “After completing this turnaround for future development and growth, we need to consider ultimate size and expansion. This growth will come through partnerships.”
Peter Wells, a professor of business and sustainability at Cardiff Business School’s Centre for Automotive Industry Research, told CNBC’s “Street Signs Europe” last week, “Nissan has been struggling in the market, struggling at home, and lacks the right product line-up.”
He added, “There are so many warning signs, so many red flags around Nissan right now that something had to happen. Whether this is the answer is another question.”
