Honda and Nissan, Japan’s second- and third-largest automakers, are in merger talks. If realized, the merger would create the world’s third-largest automotive group, with annual sales of around 7.4 million vehicles, surpassing South Korea’s Hyundai Motor Group. According to Japan’s Nikkei on Dec. 18, the companies plan to establish a holding company to manage their brands independently, with a memorandum of understanding expected soon. Mitsubishi Motors, in which Nissan holds a majority stake, is also expected to join, pushing combined sales to over 8 million vehicles.
Following the report, Honda CEO Toshihiro Mibe confirmed that discussions are underway. Once global leaders, the two automakers are exploring the merger to address declining sales in China, delays in electric vehicle adoption, and shrinking market share in Southeast Asia. In the 1990s, they were recognized for technological innovation, but Nissan faced financial difficulties in overseas markets like Spain and Mexico, prompting it to seek management support from Renault in 1999. Despite a strong recovery under Carlos Ghosn, former chairman of Renault-Nissan-Mitsubishi, Nissan has struggled to keep pace in the global market due to delays in developing proprietary technologies.
A Honda-Nissan merger would be the biggest shake-up in the global auto industry since Stellantis was formed in 2021 through the merger of Fiat Chrysler and PSA Group. The combined market capitalization of both companies would reach 8 trillion yen (about $51.5 billion). With Honda’s 3.98 million vehicle sales and Nissan’s 3.37 million, their total of 7.35 million would surpass Hyundai Motor Group’s 7.3 million, disrupting the top-three rankings of Toyota, Volkswagen, and Hyundai since 2022.
The merger talks reflect growing competition in the global auto industry. Honda and Nissan have been losing profitability in China, which accounts for about a quarter of their sales, as local competitors gain ground. The shift to electric vehicles in China has affected Japanese automakers, who were slower to adapt. Uncertainties in the U.S. market, such as potential tariffs on Mexican-made cars, have also impacted their performance. Both companies have factories in Mexico to export cars to the U.S. Reuters called the merger talks a clear sign of “how Japan’s once seemingly unbeatable auto industry is being reshaped by challenges from Tesla and Chinese rivals.”
The merger is expected to create synergies in future mobility sectors, including electric vehicles and automotive software. Nissan was an early leader in EVs, launching the electric car Leaf in 2009, before Tesla’s rise. Mitsubishi Motors, also a pioneer in compact EVs, is likely to join. Lee Hang-koo, president of the Jeonbuk Institute of Automotive Convergence Technology, said the merger “could strengthen EV competitiveness by combining Honda’s hybrid expertise with Nissan’s electric vehicle technology.”
Both companies have already signaled collaboration in the EV sector. In August, they announced a partnership to standardize software and components. Honda’s CEO emphasized the need for rapid innovation during the “once-in-a-century transformation of the auto industry.”
