Here’s How the Honda-Nissan Merger Could Reshape the Global Automotive Industry

Japanese automotive giants Honda Motor Co., Ltd. and Nissan Motor Co., Ltd. have set the industry abuzz with their announcement of potential merger talks, a move that could reshape the global automotive landscape. On December 23, 2024, the two companies signed a memorandum of understanding (MOU) to explore the creation of a new holding company, potentially forming the world’s third-largest automaker by vehicle sales.

The proposed merger, which also includes discussions with Mitsubishi Motors Corporation, aims to pool resources and technological expertise to better position the combined entity in the face of industry-wide challenges.

This groundbreaking development comes as Japanese automakers face mounting pressure to compete in the rapidly evolving electric vehicle (EV) market, where they have struggled to keep pace with U.S. and Chinese rivals. The merger, if realized, could create a formidable competitor to industry leaders Toyota Motor Corp. and Volkswagen AG, potentially altering the competitive dynamics of the global automotive market for years to come.

Under the ambitious timeline set forth, Honda and Nissan plan to conclude negotiations by June 2025 and establish a holding company by August 2026. This strategic move would see both companies’ shares delisted upon the formation of the new entity, with Honda taking the lead in the management structure while preserving the distinct identities and brands of each automaker.

The companies have outlined an ambitious timeline for their integration plans:

• Negotiations are expected to conclude by June 2025
• A holding company is planned to be established by August 2026
• Both companies’ shares will be delisted upon the formation of the holding company

Under the proposed structure, Honda would take the lead in the new management arrangement while preserving the distinct identities and brands of each automaker.

Mitsubishi Motors Corporation, a smaller member of the existing Nissan alliance, has also agreed to participate in discussions regarding the integration. This inclusion could further enhance the combined entity’s market position and technological capabilities.

The merger talks come at a critical juncture for the automotive industry, which is undergoing a significant transition towards electrification and autonomous driving technologies. Japanese automakers have been seeking ways to reduce costs and pool resources to compete more effectively in these emerging sectors.

Honda Director and Representative Executive Officer Toshihiro Mibe emphasized the importance of collaboration in the face of industry challenges, stating, “Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing”.

While specific financial details of the merger have not been disclosed, the combined entity is expected to have significant market value. Based on current market capitalizations, Honda is valued at over $40 billion, while Nissan’s value stands at approximately $10 billion.

The announcement has been met with positive market sentiment, with both companies’ stock prices rising following the news. Nissan’s shares increased by 1.6% on the day of the announcement, having surged over 20% in the preceding week as rumors of the merger circulated.

Despite the potential benefits, the proposed merger faces scrutiny from industry observers. Former Nissan chairman Carlos Ghosn criticized the move as a “desperate” and “not pragmatic” decision, citing difficulties in finding synergies between the two companies.

The companies will need to navigate complex regulatory approvals and potential cultural differences as they work towards integration.

The merger would allow Honda and Nissan to achieve greater economies of scale, potentially reducing costs in areas such as research and development, manufacturing, and procurement. 

The Japanese automakers are eyeing combined sales revenue exceeding 30 trillion yen (approximately $200 billion) and operating profits of more than 3 trillion yen ($20 billion), according to their joint statement released Monday.

Key to these projections are substantial cost-cutting measures:

• A 12% reduction in transportation costs through logistics optimization
• A 7-9% decrease in component costs, leveraging combined purchasing power

The potential merger between Honda and Nissan is likely to have significant impacts on the employment and workforce of both companies. While specific details are not yet available, several key points emerge from the available information.

Nissan has already announced plans to reduce its workforce significantly. The company is slashing 9,000 jobs, which represents about 6% of its global workforce. Nissan is also reducing its global production capacity by 20%.

These existing plans suggest that further workforce reductions may be likely in the event of a merger, as the combined company seeks to eliminate redundancies and improve efficiency.

There are concerns about potential adverse effects on local manufacturing and employment in Japan. Japanese government officials have expressed hope that regional employment considerations will be taken into account

Sources

1. Nissan Motor Co., Ltd. (2024, December 23). Nissan, Honda, and Mitsubishi Motors sign MOU on collaborative considerations.
2. Honda Motor Co., Ltd. (2024, December 23). Nissan, Honda, and Mitsubishi Motors sign MOU on collaborative considerations.
3. Honda Motor Co., Ltd. (2024, December 23). Nissan and Honda sign MOU to consider business integration .
4. Associated Press. (2024, December 23). Honda and Nissan announce merger talks amid a rapidly changing global market.
5. Kyodo News. (2024, December 23). Honda, Nissan aim to merge under holding company in 2026.
6. Bloomberg. (2024, December 20). Ghosn Says Honda Deal Talks Indicate Nissan Is in ‘Panic Mode’.
7. Honda Motor (China) Investment Co., Ltd. (2024, December 23). GAC Honda Begins Operation of New Energy Vehicle (NEV) Production Factory in Guangzhou, China .