Honda and Nissan launch negotiations for historic merger

Collaboration between the rival Japanese car makers set to create the world's third-largest automaker by sales. Both face increasing competition from electric vehicles made in China.

Honda and Nissan, two major Japanese car companies, announced on Monday that they have signed a basic agreement to officially begin merger talks.

The merger will create the third-largest car company in the world, after Toyota and Volkswagen.

Mitsubishi Motors, in which Nissan is top shareholder, was also considering joining, the companies said.

"The rise of Chinese automakers and new players has changed the car industry quite a lot," Honda CEO Toshihiro Mibe said.

"We have to build up capabilities to fight with them by 2030, otherwise we'll be beaten," he said.

Transition away from fossil fuels

Executives from Honda, Japan's second-largest automaker, and Nissan, its third, agreed to have a formal merger agreement by June, complete the deal, and list the holding company on the Tokyo Stock Exchange by August 2026.

Honda will initially lead the new management, but both brands will stay intact. 

Honda and Nissan, like other automakers, have lost market share in China to BYD and various electric and hybrid car manufacturers, including Tesla.

Thanks to government support for EVs, China overtook Japan as the biggest vehicle exporter last year.

Nissan and Honda had already announced in March that they would work together in the future on the development of electric vehicles and software technologies in order to reduce their costs and improve competitiveness. Mitsubishi joined these talks in August. 

Nissan chief Makoto Uchida praised Honda's agility and ability to adapt as the industry shifts, praising the company as "a partner who can share the sense of crisis about the future."

"As the business environment for automakers changes in the future, I believe we will not be able to get there unless we have the courage to change ourselves," Uchida said.

Even after the merger, Toyota, which rolled out 11.5 million vehicles in 2023, will remain the leading Japanese automaker. 

Last year, Honda, Nissan and Mitsubishi made just over 8 million vehicles combined.

Nissan struggling financially

A merger could create a behemoth with combined sales of 30 trillion yen ($191 billion) and operating profit of more than 3 trillion yen.

Nissan already has an alliance with France's Renault Group, but that is currently under review as the company battles financial woes.

Last month, it announced it was cutting 9,000 jobs, about 6% of its international workforce, following a quarterly loss of 9.3 billion yen ($61 million). CEO Makoto Uchida announced he was taking a 50% pay cut as part of taking responsibility for the issues.

"This is not a rescue of Nissan," however, Honda's Mibe said, adding that Nissan's business turnaround was a "prerequisite" for the merger.

Honda has also been struggling, reporting that profits declined by 20% in the first half of the fiscal year.

lo/rm (AP, AFP, Reuters)