Honda and Nissan, two of Japan’s leading automakers, are reportedly in early talks about a potential merger to strengthen their position in the fast-evolving electric vehicle (EV) market, particularly against rising competition from Chinese manufacturers.
The two companies, which had already agreed to explore a strategic partnership for EVs in March, responded to the speculation with nearly identical statements. They said, “As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.”
Early-Stage Discussions
First reported by Japanese business newspaper The Nikkei, the merger discussions are said to be preliminary, with no guarantee of a final agreement. The firms have not denied the report but clarified that no official announcement has been made.
The Japanese TV channel TBS suggested that Honda and Nissan may officially confirm the talks as early as next week. However, a merger of this scale could face several challenges, including political scrutiny in Japan and potential job losses.
Strategic Challenges and Opportunities
The move comes as global automakers grapple with declining market shares in China, the world’s largest EV market. Together, Honda and Nissan sold 7.4 million vehicles globally in 2023 but are struggling to compete with Chinese EV makers like BYD, which surpassed Tesla’s quarterly revenue for the first time in October.
Industry analysts have pointed out the growing pressure on smaller automakers to adapt. Edmunds analyst Jessica Caldwell remarked, “It’s just sort of necessary to survive, not only to survive, but also just to afford the future.”
Complications and Potential Partnerships
A merger could also complicate Nissan’s alliance with French carmaker Renault and may involve Mitsubishi Motors, where Nissan holds a significant stake. In August, Honda and Nissan announced plans to collaborate with Mitsubishi on battery and EV technology, potentially setting the stage for a broader partnership.
Shares of Nissan and Mitsubishi surged following the merger speculation, with Nissan rising 23% and Mitsubishi jumping 20%. Meanwhile, Honda shares fell by about 3%.
Industry Skepticism
Some experts remain skeptical about whether a merger would significantly improve the companies’ competitiveness. Jesper Koll of Monex Group questioned the strategic value, saying, “Is this really just rearranging the deck chairs on the Titanic in the sense that neither Honda nor Nissan really have any products or technologies that global consumers want?”
As the industry shifts towards electrification and faces increasing competition from China, a potential merger could mark a pivotal moment for Japan’s auto sector. Whether Honda and Nissan can leverage their combined strengths remains to be seen.
