Japanese automotive giants Nissan and Honda have initiated official discussions to merge, aiming to create the world’s third-largest automaker by sales. The planned merger, first reported by Japan’s Nikkei newspaper on December 17, represents a strategic move to enhance competitiveness in the rapidly evolving automotive landscape, particularly in electric vehicles (EVs) and intelligent driving technologies.
The discussions are expected to conclude by June 2025, with both companies proposing to establish a holding company that would act as the parent organization for Nissan and Honda. This new entity would be listed on the Tokyo Stock Exchange, reflecting its significant market presence.
Financial projections for the merged group are promising, with the potential to generate revenues of approximately 30 trillion yen (around $191.4 billion) and operating profits exceeding 3 trillion yen. Such figures underscore the scale of the merger and its anticipated impact on the global automotive market.
Honda CEO Toshihiro Mibe emphasized the necessity for the companies to achieve greater scale in order to compete effectively in the development of new technologies. He stated, “If Nissan and Honda fail to stand on their own feet, the business integration talks will not come to fruition.” This highlights the critical importance of financial stability and operational efficiency for both companies moving forward.
The combined valuation of Nissan and Honda would approach $54 billion, with Honda's market capitalization contributing a substantial portion at over $43 billion. In contrast, Honda reported an operating profit of 1.382 trillion yen for the fiscal year ending March 2024, significantly surpassing Nissan’s 568.7 billion yen.
Should the merger proceed, it would position the newly formed group ahead of South Korea’s Hyundai in terms of sales. Notably, Honda is expected to nominate most of the board members for the integrated entity, reflecting its larger share of market capitalization.
Nissan CEO Makoto Uchida addressed the significance of this potential merger, stating that discussions regarding integration do not indicate a retreat from Nissan's turnaround efforts. He remarked, “After doing this turnaround action for future development, future growth, we need to look at ultimate size and growth. This growth will be through partnerships.” This statement underscores the urgency for both automakers to adapt amid intense competition in the EV sector, which is currently dominated by companies like Tesla and China’s BYD.
As both Nissan and Honda navigate these challenging waters, Mitsubishi Motors has been offered an opportunity to join this new group. The company is expected to make a decision by the end of January 2025, potentially further consolidating the Japanese automotive industry.
Market reactions indicate optimism surrounding the proposed merger; Nissan shares saw a notable spike following the initial report. However, experts caution about potential pitfalls. Peter Wells, a professor of business and sustainability at Cardiff Business School’s Centre for Automotive Industry Research, observed that "there are so many warning signs, so many red flags around Nissan at the moment that something had to happen. Whether this is the answer is another question.”
