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

Honda-Nissan Merger: Two Japanese automakers, Honda and Nissan have announced plans to merge and to form the world's third-largest automakers by sales. This developments comes as the industry undergoes dramatic changes in its transition away from fossil fuels. The two  automakers have signed a memorandum of understanding on Monday. 

The smaller Nissan alliance member Mitsubishi Motors also agreed to join the talks on integrating their businesses. This merger will make it the third-largest auto group by vehicle sales after Toyota and Volkswagen as legacy carmakers face growing challenges from Tesla and Chinese rivals.

Honda, the second largest automaker after Toyota, has a market capitalisation of more than $40 billion. Nissan is ranked in the third position and has a market capitalisation $10 billion.

Automakers in Japan have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time.

News of a possible merger surfaced earlier this month, with unconfirmed reports saying that the talks on closer collaboration partly were driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan, which has an alliance with Renault SA of France and Mitsubishi.

A merger could result in a behemoth worth more than $50 billion based on the market capitalisation of all three automakers. Together, Honda and the Nissan alliance with Renault SA of France and smaller automaker Mitsubishi Motors Corp would gain scale to compete with Toyota Motor Corp and with Germany's Volkswagen AG. Toyota has technology partnerships with Japan's Mazda Motor Corp. and Subaru Corp.

Even after a merger Toyota, which rolled out 11.5 million vehicles in 2023, would remain the leading Japanese automaker. If they join, the three smaller companies would make about 8 million vehicles. In 2023, Honda made 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million.

Nissan, Honda and Mitsubishi announced in August that they would share components for electric vehicles like batteries and jointly research software for autonomous driving to adapt better to dramatic changes centred around electrification, following a preliminary agreement between Nissan and Honda set in March.

(with inputs from AP)

Also Read: Foxconn Interest in Nissan on Hold Amid Honda Merger Talks, Bloomberg reports