Honda Motor and Nissan Motor, Japan’s second- and third-largest automakers, are exploring a merger to create one of the world’s largest auto groups, worth over $50 billion. The move is aimed at better positioning themselves for the expensive technological transition reshaping the automotive industry.
According to a memorandum of understanding signed on Monday, Honda and Nissan will formally begin talks aimed at deepening their partnership, which began earlier this year. Over the next six months, the companies will discuss combining their operations under a holding company, with the goal of completing the merger in August 2026.
The merger is seen as a lifeline for Nissan, which has been slashing jobs and production amid faltering sales. Honda’s chief executive, Toshihiro Mibe, said the companies need to have the right “artillery” to be competitive in the rapidly changing industry.
“Current business models are being upended. It is not going to take 10 to 20 years for that to happen, it will come much faster,” Mr. Mibe said. “We need to have the right artillery in order to be competitive on that battlefield, so we’re starting today.”
The combined entity would position Honda and Nissan as the world’s third-largest automaker group, behind Toyota and Volkswagen. The merger would also enable the companies to standardize the basic makeup of vehicles and increase production, reducing costs and freeing up cash for research and development.
However, industry experts warn that even with expanded scale, the Japanese automakers will need to prove that their partnership can speed their development of new vehicles. “If they cannot create some kind of ‘chemical reaction’ of new value by coming together, their merging will simply become a gathering of the weak,” said Tang Jin, a senior researcher at Mizuho Bank.
The merger is part of a wave of consolidation in the Japanese car industry, with over $10 billion in mergers and acquisitions this year, up 163 percent from a year earlier.
