TOKYO, Japan – Japanese automakers Honda and Nissan have announced plans to merge, a move that would create the world’s third-largest automaker by sales and position the companies to better navigate the industry’s seismic shift towards electric vehicles (EVs).
In a memorandum of understanding signed Monday, December 23, 2024, the two automakers confirmed their intent to integrate their businesses, with smaller Nissan alliance member Mitsubishi Motors also participating in discussions.
Honda is set to take the initial leadership role in the merged entity, although the companies plan to retain their individual principles and brands.
Adapting to Industry Shifts
The merger comes as Japanese automakers face increasing pressure to catch up with competitors in the EV market.
Chinese manufacturers, including BYD and Nio, have gained significant ground with relatively affordable EVs that are eroding market share from established players in the U.S. and Japan.
Nissan, Honda, and Mitsubishi previously announced plans to share EV components, such as batteries, and to jointly research autonomous driving technologies.
The merger is expected to expand these collaborations, allowing the companies to pool resources and scale operations.
“Joining forces would provide the scale needed to compete with giants like Toyota and Volkswagen,” said Sam Abuelsamid, a Detroit-based automotive analyst.
Complementary Strengths
Honda and Nissan bring unique assets to the partnership.
Nissan, an early entrant into the EV market, has years of experience developing electric vehicles and hybrid powertrains, such as those used in the Leaf and Ariya.
While these models have struggled to gain traction in the U.S., they represent a foundation that could accelerate Honda’s EV development.
Additionally, Nissan’s expertise in large, truck-based SUVs—an area where Honda has limited offerings—could fill gaps in Honda’s product lineup.
“Nissan does have some product segments where Honda doesn’t currently play,” Abuelsamid noted.
For its part, Honda’s reputation for reliability and efficient operations could bolster Nissan, which has faced challenges in recent years, including financial troubles and management upheaval.
Why Now?
Nissan has struggled to regain stability following the 2018 arrest of former chairman Carlos Ghosn on charges of fraud and misuse of company assets.
The company recently announced a restructuring plan, including the elimination of 9,000 jobs and a reduction in global production capacity.
Honda, meanwhile, has seen declining sales in China and reported a nearly 20% drop in profits during the first half of the current fiscal year.
Adding urgency to the talks was a report that Taiwanese electronics manufacturer Foxconn had explored acquiring Nissan to support its push into the EV market.
Analysts suggest Honda and Nissan acted swiftly to protect Nissan from being absorbed by a non-automotive entity.
Challenges Ahead
Despite the potential benefits, the combined Honda-Nissan-Mitsubishi group would still trail Toyota, which produced 11.5 million vehicles in 2023, compared to Honda’s 4 million and Nissan’s 3.4 million.
Additionally, global automakers face growing uncertainty as President-elect Donald Trump prepares to implement trade policies that could impose tariffs on imported vehicles, even from key allies like Japan.
Such measures could further disrupt supply chains and squeeze profits.
In the U.S., a critical market for both Honda and Nissan, an affordability shift is pressuring automakers to offer lower-priced vehicles.
This trend could erode profitability just as companies invest heavily in EV technology and infrastructure.
The Road Ahead
If successful, the merger would mark a significant realignment in the automotive industry, enabling Honda and Nissan to pool resources, cut costs, and compete more effectively in the EV era.
However, the path forward is far from certain with complex integration challenges and volatile market conditions.
As Honda and Nissan begin formal discussions, the industry will watch closely to see whether this historic merger can reshape the competitive landscape or simply stall in the face of mounting challenges.
