Honda Motor and Nissan Motor are exploring a merger to create one of the world’s largest auto groups as they seek to better position themselves for the expensive technological transition reshaping the automotive industry.
On Monday, Honda and Nissan signed a memorandum of understanding to formally begin talks aimed at deepening a partnership that began earlier this year. Over the next six months, the companies will discuss combining their operations under a holding company, with the goal of completing the merger in August 2026.
Honda and Nissan, Japan’s second- and third-largest automakers, would join a growing number of legacy auto giants, including General Motors and Volkswagen, that are deepening ties to share the financial burden of developing next-generation vehicles. The deal is seen as a lifeline in particular for Nissan, which has been slashing jobs and production amid faltering sales.
Unlike the gasoline-powered cars that have defined the industry for most of the past century, more vehicles today are being equipped with batteries, electric motors and advanced software that enable features such as autonomous driving.
To navigate the change, Honda and Nissan have decided they can better handle research and development and new investments as a combined force, Honda’s chief executive, Toshihiro Mibe, said at a briefing in Tokyo on Monday.
“Current business models are being upended. It is not going to take 10 to 20 years for that to happen, it will come much faster,” Mibe said. “We need to have the right artillery in order to be competitive on that battlefield so we’re starting today,” he said.
In recent years, automakers across Japan, the United States and Europe have invested billions of dollars into electric vehicle development — efforts that, for the most part, have yet to generate profits. These investments are being financed by sales of higher-margin gasoline and hybrid models, which also require continuous investment.
With electric vehicle-sales growth slowing and US President-elect Donald Trump gearing up to eliminate EV tax incentives, automakers must figure out how to sustain investments in gasoline and battery-powered cars for an extended period of time, said Takaki Nakanishi, head of the automotive consulting firm Nakanishi Research Institute in Tokyo.
“To sustain these dual investments, automakers need scale and the operational efficiencies that come with it,” Nakanishi said. “If Nissan and Honda are not able to achieve this, they will not survive,” he said. “Times are truly that tough.”
Nissan sells more than three million vehicles a year, while Honda sells nearly four million. A merger would position them as the world’s third-largest automaker group, behind Toyota, whose brands sold 11 million vehicles last year, and Volkswagen, which sold nine million. Honda and Nissan together employ about 325,000 people.
Nissan and Honda said integrating their businesses would enable them to standardise the basic makeup of vehicles and increase production. Those steps would reduce how much each company spends on developing vehicles, freeing up cash to spend on things like new software.
The key question is whether even large, combined entities like Honda and Nissan can keep up with newer competitors.
The US Tesla and China’s BYD have already established a commanding lead in electric vehicles and car technologies that can be updated over the air like smartphones.
NYTNS