Honda and Nissan Merger: A Strategic Move to Compete in the EV Market - Explained

Honda and Nissan Merger: Honda and Nissan has recently announced merger plans, and it is one the most discussed topics in the automotive market. This alliance is a significant move in the global automotive industry as it will be the third largest automotive companies by sales volume. A combined company of Honda and Nissan is likely to create a $54 billion company that is likely to have an annual output of 7.4 million vehicles.

As global car manufacturers are shifting towards EVs, this merger comes amid the changing landscape for ICE vehicles and a surging competition from Chinese automaker like BYD, and Tesla in the Chinese and US automotive market. According to a Reuter’s report, Honda and Nissan has signed a memorandum of understanding (MoU) recently. Further, Mitsubishi Motors is also expected to join the integration talks.

Let us deep dive further and see more details of this upcoming merger between Honda and Nissan:

Also Read: Nissan, Honda Announce Merger Plan, Creating World's Third-Largest Automaker

First, the Market Capitalisation of Honda and Nissan:

Before going ahead and discussing more details of the merger, let us have a look at the market capitalisation of these two companies. Honda has a market capitalisation of more than $40 billion, while Nissan has an about $10 billion.

Why is Honda-Nissan Merger taking place?

Nissan has been financially struggling in recent times. Earlier partnerships with Renault and Mitsubishi did not help in falling sales of vehicles. With the rising competition and shift towards electrified and plug-in hybrid vehicles, the sales of Honda Cars have also recorded a dip. However, Nissan eyes this merger as a potential help from Honda. Recently, as per a report from Reuters, Nissan announced a plan to cut 9,000 jobs and 20 per cent of its global production capacity after its sales plunged in its key China and US markets. Further, Honda had also stated about the worse-than-expected earnings result due to falling sales in China.

What are the Challanges Faced by Honda and Nissan Earlier?

Since there is a global shift towards electric mobility and buyers are shifting towards EVs and plug-in hybrid vehicles the major challenge of Honda and Nissan is the intense competition faced from the Chinese EV automakers in the Chinese and US markets Earlier Nissan had faced financial difficulties, and ought to stablise its operations post the merger.

What will be the key area of developments after Honda and Nissan merger?

Nissan has invested in the development of battery electric vehicles heavily. 15 Years ago, the company had launched the Leaf, which was the first EV from Nissan. As a part of this merger, Honda is likely to utilise the Nissan’s resources for the development of its EVs.

As per Reuters, Honda will supply hybrid vehicles to Nissan as part of the plan. The two Japanese auto manufacturers has developed a strategic partnership in March 2024 to cooperate in the development of electric vehicles. This possible merger is likely to bring down the costs of development of EVs and other technologies, which can further result in bringing more competitive product.

When will Honda and Nissan Finalise Integration Talks?

According to Reuters report, Honda and Nissan aim to finalise the integration talks by June 2025. If it becomes successful, there will be a joint holding company that will list its shares while Honda and Nissan each will go private in August 2026.

Potential developments in the EV industry:

With this Honda and Nissan merger, there will be major technological advancements taking place in the EV industry, and development of new models, that are likely to compete against the major EV players like BYD, Tesla, and more.

Honda and Nissan Merger: Impact on the Indian Automotive Market

That said, with the announcement of the two major Japanese automotive manufacturers, it is still unclear what impact will be there from this merger in the Indian automotive market.