Honda and Nissan's merger will create the world's third-largest automaker, after Toyota and Volkswagen. The newly created entity will most likely include Mitsubishi, which is already in a partnership with Nissan and Renault. Renault, however, will most likely not be part of this deal.
These complicated maneuvers come against the backdrop of major upheavals among legacy carmakers around the world. German giant Volkswagen is in trouble, and there are indications that it may have to close two factories in Germany just to survive.
It is not just VW that is in trouble. Carmakers around the world are struggling to make the transition to EVs, as most have totally misread the demand and price resistance for such vehicles. EV battery prices are coming down, but not quite fast enough to boost demand. Legacy carmakers have to keep making ICE vehicles to survive, while expensive investments in EV factories are underutilized. The planned Honda/Nissan merger is a direct result of these factors, and there will likely be further consolidation in this sector.
In order to give you the most up-to-date and accurate information possible, the data used to compile this article was sourced from Honda, Nissan, and other authoritative sources, including Reuters.
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Posts 1 Why Honda And Nissan Want To Merge Close
Honda is very much the senior partner in this planned merger, while Nissan is currently in a financial mess. Although Nissan is one of the leaders in solid-state battery development, as well as specific manufacturing methods, the company has lost market share from its high point in 2018. Its fleet is aging, it has totally misread the EV market, and it canceled its hybrid lineup just as this drive exploded in popularity.
Honda is doing very well, especially in the vital U.S. market with its hybrids. It is however facing headwinds from Hyundai and Kia in this market, while its EV offering consists of one SUV model only .
The Threat From China
The biggest threat faced by Honda and Nissan resides in China. China passed the U.S. as the world's biggest car market around 2010, and now sells 30 million per year compared to 15 million in the U.S. This makes China the world's most important car market, but foreign carmakers, including Honda and Nissan, are losing market share there. China is also the biggest producer of EV batteries in the world, and can make these cheaper than anywhere else. It is even an international supplier of EV batteries to brands such as Tesla.
Chinese EVs dominate this vast market, with BYD recently overtaking Tesla in global sales. China also surpassed Japan as the biggest car exporter in the world in 2024. Although Chinese brands face regulatory opposition in their overseas markets, they are aggressively building new factories in Europe and soon in Mexico, much like the Japanese did in the '70s to overcome resistance. Chinese brands dominate in their own market and pose significant threats to the markets in which most legacy brands are based.
Creating Economies Of Scale
This merger between Honda and Nissan will create the world's third-biggest carmaker, which will bring much-needed economies of scale to both brands. Honda produced four million vehicles in 2023, while Nissan made 3.4 million. Should Mitsubishi join, which is not certain yet, it would add another million vehicles to this total. These figures create a lot of room for synergy going forward, but it will take time.
The obvious synergies flowing from the merger would be in sharing the cost of R&D, consolidating manufacturing, sharing common parts, and building different brand-name cars with similar underpinnings. It remains to be seen if both Acura and Infinity will survive the merger.
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Posts 1 Complicating Factors
The current drive to mergers and partnerships is not new, and there are numerous cooperative endeavors that span the global auto industry. These range from manufacturing cooperation agreements - think the ill-fated production of Mercedes-Benz pickup trucks by Nissan - as well as R&D agreements, especially in the field of EVs and EV battery development. Both Nissan and Honda are entangled in agreements with third parties that could delay, complicate, or even scuttle the planned merger.
Nissan Renault
Nissan is in a complicated partnership with Renault, which also involves Mitsubishi. This partnership was formed in 1999 when Renault bought a stake in Nissan, and this stake is now 35.7-percent and worth $3.6 billion. Renault is reportedly keen to sell this stake, but Honda would like Nissan to clean up this potential third-party mess by buying back its share currently held by Renault. The merger, once it goes through, will involve significant technology transfers between the partners, and Honda does not want to share its technology with some as yet unnamed third party.
The problem is that Nissan is in serious financial distress at the moment, and there is doubt whether it can raise the $3.6 billion needed.
Mitsubishi Doesn't Seem Too Happy About It
In a recent turn of events, it looks like Mitsubishi doesn't want to be part of this merger. Reuters reported that the Japanese automaker, part of the alliance with Renault and Nissan, wants to go solo and not be a part of this merger. It wants to maintain its current structure and expand its market share in the Southeastern Asian market instead.
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Foxconn
Foxconn is a Taiwanese electronics giant that makes around 40-percent of cell phones in the world. It is involved in EV technology, but currently does not build any cars. But Foxconn very much would like to get into the EV market just as it is seriously taking off.
Foxconn Chief Strategy Officer Jun Seki (ex-Nissan) reportedly met with Renault executives recently to negotiate to buy Renault's stake in Nissan. This would give Foxconn instant access to auto design and production, including Nissan's advanced manufacturing technology. Honda, already entangled in a relationship with a high-volume, low-cost manufacturer in mainland China, has no desire to dilute its dominant position in this new partnership by bringing Foxconn into the hen house.
Dongfeng Motor
The Chinese government insisted years ago that carmakers investing in China had to do so in partnership with a Chinese company. Both Nissan and Honda have separate partnerships with Dongfeng Motor.
Donfeng builds Nissan vehicles under contract for the Chinese market. Donfeng and Nissan cooperate in developing EVs. Honda and Dongeng have EV development agreements. Dongfeng builds the Honda Ye range of cars exclusively for the Chinese market. Dongfeng designs and builds cars under its own brand as well. What Each Carmaker Will Add
Honda and Nissan are both massive world brands. Although the two companies are now competitors and there are many overlaps in technology and their vehicle ranges, each does bring specific strengths to the partnership that would add synergy and value. These synergies are particularly important for survival and growth in today's uncertain automotive environment. These two companies can lower capital costs, as well as R&D in electrification, battery, and EV software developments.
Honda Adds Size, Hybrid Tech
Honda brings size and market share, especially in the crucial U.S. market. As an original pioneer , alongside Toyota, of hybrid technology, Honda was perfectly placed to take advantage of the spike in hybrid sales while the world waits for the elusive EVs to finally take over. Nissan's hybrid initiative came to a premature end in 2019, just as hybrids really took off. Honda also brings financial muscle to the partnership, part of the reason it is very much the senior partner.
Nissan Brings EV Tech, Specific Manufacturing Benefits
Nissan was an early pioneer in EVs, with the first affordable such vehicle in the Leaf. Although Honda is also involved in EV development, Nissan is one of the world leaders in solid-state battery development, with large-scale production timelines matching those of Toyota's much-vaunted SSB program. Nissan is also a world leader in manufacturing with its body-on-frame and large unibody platforms.
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Posts The Road Ahead
The merger between Honda and Nissan, if and when it happens, will not be a quick process. Not only will the various legal and financial entanglements have to be resolved, but it will take time to integrate the management structures, rationalize R&D programs, and integrate production. There is also a vast network of marketing, distribution, and sales infrastructures that have to be bought into lockstep without harming the equity of either brand.
Creating A Separate Holding Company
As things now stand, Honda and Nissan plan to establish a holding company by August 2026, when both companies will delist from the Tokyo Stock Exchange to become subsidiaries of the new holding company. Before that, investors will be asked to approve the deal around April that year. The reason for this long delay is for Nissan to untangle from its onerous partnerships, and complete its restructuring so that any financial impact would be on Nissan's balance sheet and not involve Honda.
Building Towards 2030 And EV Market Share Close
Honda CEO Toshihiro Mibe has named 2030 as when the merger will finally bear fruit. The history of automotive integration would suggest that slow and careful is better than fast and shoddy. This will give the partners time to integrate their technological advantages, and develop a volume purchasing scale without harming either company.
2030 is very much the date when lithium-ion batteries will be cheaper to produce than ICE counterparts, and when solid-state batteries will enter the mass market. Mibe's stated objective is to use the time from now to then to build a world-class new mobility company.
Challenges To This Merger
Merging two such companies is difficult enough, but doing so during a time when the auto industry is facing its biggest crisis since the early seventies makes this particularly hazardous. Both companies are caught up in complicated partnerships and agreements with third parties that will have to be resolved, while Nissan's current dire financial position adds a further layer of friction.
Nissan's Financial Woes
Nissan's financial woes started when its then chairman Carlos Gnosn was arrested on charges of fraud and misuse of company assets in 2018. Gnosn has denied the charges, but has since fled Japan in a daring escape. Nissan suffered a quarterly loss of $60m in the third quarter of 2024, and has since cut 9000 jobs, six percent of its global workforce. It has also reduced production by 20 percent.
Automotive Mergers Are Difficult
Automotive mergers over the past decade or so have not always gone well. There was BMW's takeover of the Rover Group, Ford's acquisition of top European brands, Daimler Benz's takeover of Chrysler, and the ongoing difficulties that came from Stellantis's grouping of FCA, Peugeot, and GM Europe.