Honda and Nissan are believed to have engaged in preliminary discussions about a possible merger to strengthen their position against electric vehicle (EV) manufacturers, especially in China.
In March, the two Japanese automakers agreed to explore a strategic EV partnership.
The companies issued identical responses to the BBC, stating, “As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.”
As the industry transitions from petrol and diesel vehicles to electric, many car brands are facing increasing competition, particularly with production booming in China.
Honda and Nissan have not refuted the report, initially published by the Japanese business newspaper Nikkei, but clarified that it was “not something that has been announced by either company.”
The talks are believed to be in the early stages, and there is no certainty that a deal will be reached.
“If there are any updates, we will inform our stakeholders at the appropriate time,” they added.
According to Japanese TV channel TBS, the two companies are expected to officially confirm their discussions as soon as next week.
A potential merger between Japan’s second and third-largest car manufacturers could face several complications.
Any deal would likely attract significant political scrutiny in Japan, particularly due to the possibility of major job cuts. Additionally, Nissan may need to dissolve its alliance with French automaker Renault.
In March, Honda and Nissan agreed to collaborate on their EV businesses, and in August, they strengthened their partnership, agreeing to jointly work on batteries and other technologies.
The two companies also announced in August an agreement with Mitsubishi Motors to explore areas of intelligence and electrification.
The Nikkei also reported that Nissan and Honda may eventually involve Mitsubishi in any potential partnership, with Nissan being Mitsubishi’s largest shareholder.
Following the reports, Nissan’s shares rose by more than 20% in Tokyo, while Honda’s shares dropped by about 2%, and Mitsubishi’s shares surged by 13%.
“The thought that some of these smaller players can survive and thrive is getting more challenging, especially when you add on the complexity of all the additional Chinese manufacturers who have come in and are competing quite strongly,” said Edmunds analyst Jessica Caldwell.
“It’s just sort of necessary to survive, not only to survive, but also just to afford the future.”
Honda and Nissan have been losing market share in China, which represented nearly 70% of global EV sales in November.
Together, the two brands sold 7.4 million vehicles globally in 2023, but they are facing challenges competing with more affordable EV manufacturers like BYD, whose quarterly revenues surged, surpassing Tesla’s for the first time in October.
Jesper Koll of Japanese online trading platform Monex Group raised doubts about whether a merger would enhance the companies’ competitiveness.
“Is this really just rearranging the deck chairs on the Titanic in the sense that neither Honda nor Nissan really have any products or any technologies that global consumers want?”
“From that perspective, it’s a nice rescue but it’s not creating a new national champion.”