Honda wants to merge with Nissan in mid-2026

Honda And Nissan have agreed to a merger, which, if all goes according to plan, will see the two carmakers become one by mid-2026.

Spurred by Nissan’s precarious financial position, the continued rise of Chinese automakers and the enormous costs of developing large-scale electric vehicle platforms, Honda and Nissan will join forces to potentially become the world’s third-largest automaker.

At a press conference chaired by Nissan CEO Makoto Uchida, Honda CEO Toshihiro Mibe and Mitsubishi Motors CEO Takao Kato, the automakers said Honda and Nissan have signed a Memorandum of Understanding, completing work for a merger between Japan’s second largest has formally begun. (Honda) and the third largest (Nissan) car manufacturers.

Timeline for a potential mega-merger

Because Honda is in a much stronger financial position – its market capitalization is four times that of Nissan, and it is still profitable – it will appoint a majority of the combined automaker’s board, and the top positions will be taken by Honda nominees.

According to the timeline established by the two car companies, a definitive agreement setting out the details of the merger, including share transfers, will be completed in June 2025. Shareholders of both companies will then vote on the merger in April 2026.

Assuming approval is given, Honda and Nissan will be delisted from the Tokyo Stock Exchange in late July or early August 2026, with a new holding company taking their place.

Mitsubishi Motors will decide by the end of January 2025 whether to join the Honda-Nissan merger. Nissan is currently the largest shareholder of Mitsubishi Motors, but due to recent financial problems, recently sold part of its stake and no longer owns a controlling 34 percent stake.

Based on 2023 sales figures, the merged Honda-Nissan entity would be the world’s third-largest automaker by volume. Their combined sales of 7.35 million cars would surpass Hyundai-Kia, which sold 7.31 million cars last year.

Mitsubishi’s potential participation in the merger would add about 900,000 to the combined number of automakers, comfortably passing Hyundai-Kia but still behind Toyota and Volkswagen.

Should current capitalization levels hold, the Honda Nissan merger could eclipse the US$52 billion ($83 billion) merger of PSA (Peugeot-Citroen) and Fiat Chrysler to form Stellantis in 2021.

When or if the Honda-Nissan merger happens, it will consolidate the Japanese automakers into two major clear blocs, with Honda-Nissan-Mitsubishi on one side and Toyota on the other. Toyota, the world’s largest automaker, wholly owns Daihatsu and Lexus and has minority stakes in Subaru, Suzuki and Mazda.

Why now?

Speaking to the press, Honda CEO Toshihiro Mibe said the combination “is not a rescue for Nissan” and that getting Nissan’s affairs in order was a “prerequisite” for the merger.

Last month, red ink started spilling at Nissan, with the company saying it was entering “emergency mode” with plans to cut production capacity by 20 percent and lay off 9,000 workers.

Since then, rumors have been circulating about merger talks between Honda and Nissan. The long-standing rivals began discussions on joint projects in March this year, before confirming in August that they and Mitsubishi would work together on electric vehicles and intelligence.

According to ReutersTaiwan’s Foxconn, the contract manufacturer known for building the Apple iPhone, approached Nissan for a bid but was rejected by the automaker.

Both Honda and Nissan, like many other automakers including Volkswagen, have been hit hard by the surge in demand for local brands in China, which has been largely driven by electric vehicles developed by domestic manufacturers such as BYD, SAIC and Geely .

Honda’s motorcycle business, strong hybrid power and comfortable position in the U.S. market, especially with private buyers, have helped the company weather the storm so far. Nissan, with its lack of hybrid models in North America and its more bargain-oriented position, is dealing with declining sales and growing inventories.

Synergies and potential pitfalls

Honda and Nissan project that the combined company will eventually have annual sales of ¥30 trillion (A$310 billion) and operating profits of more than ¥3 trillion (A$30 billion).

There could be a lot of pain to come in the short term, however, with Mibe-san warning that the combined automaker won’t see significant profits until 2030.

In the medium term, Honda and Nissan will combine platforms to reduce costs for both brands by increasing scale and reducing research and development costs.

Both manufacturers are currently working on new EV architectures for vehicles coming later this decade. One of these platforms may have to be shelved, causing potential delays for one brand.

Research and development departments will also be brought together, which some industry analysts say could lead to clashes in corporate culture. Other cost savings will come from combining back-office activities such as marketing, HR and IT.

Factory closures are likely to occur as automakers look to “optimize production systems and facilities” through the “shared use of production lines.”

During the press conference, Mibe-san wanted to point out that the merger will not be solely focused on “just cutting out, cutting out, cutting out and leaving only the good parts.”

He said the new company would like to “think about options that take us to greater scale,” and dangled the thought bubble of combining Honda’s strength in hybrid powertrains with Nissan’s knowledge of body-on-frame architectures to create a to create a hybrid ute.

It is unknown at this time what the combined Honda Nissan will be known as, nor do we know how the company plans to differentiate its two main brands. There is significant overlap in models and geographies for both companies, with Honda and Nissan generating 37 percent of their sales from the North American market.

While Honda has a stronger presence in China and Asia, Nissan has a significantly larger market share in Europe. The two car manufacturers each have a significant position in the Japanese kei car market.

While the automakers say they will “continue to develop the Honda and Nissan brands equally,” there will certainly be debate about the ultimate fate of their luxury brands, Acura and Infiniti. Both are struggling for sales and have largely retreated to their North American bases.

Although Nissan’s relationship with Renault has unraveled spectacularly since the arrest of former CEO Carlos Ghosn in 2018, the two still have shared platforms, purchasing agreements and some shared models, mainly vans for the European market.

At the height of their alliance, Renault had a 44 percent stake in Nissan. As part of the revamped Renault-Nissan-Mitsubishi Alliance announced in early 2023, Renault agreed to slowly sell its equity stake in Nissan to 15 percent, while Nissan finally gained voting rights at Renault.

Honda, on the other hand, has worked closely with GM on hydrogen fuel cell research and development, and currently sells the Honda Prologue and Acura ZDX electric crossovers in North America, both of which are produced by GM and equipped with Honda developed bodies and parts. interiors mounted on a GM-designed EV architecture.

The last time Honda owned a significant portion of another carmaker was in the 1980s and 1990s, when it had a 20 percent stake in the Rover Group. It was finally sold out in 1994 when BMW bought the remaining 80 percent of Rover from British Aerospace.

Mibe-san said Honda will continue its work with GM after the merger. Similarly, Uchida-san said Nissan will continue to work with Renault on a “project basis” as soon as synergies become available.

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