Honda and Nissan, two of Japan's leading automotive manufacturers, are engaged in discussions regarding a potential merger.
The companies announced they had signed a Memorandum of Understanding (MOU) on March 15th to explore a business integration. A second MOU was signed on August 1st, further outlining the potential for joint research into fundamental technologies for next-generation software-defined vehicles (SDVs).
The merger is viewed as a strategic response to changes in the global automotive market, including the growth of EV manufacturers and increasing competition. The combined company is projected to generate revenue of over 30 trillion yen ($191.4 billion) and operating profits exceeding 3 trillion yen.
Analysts suggest the potential tie-up is, in part, a consequence of Nissan's recent financial underperformance. The company recently announced significant job cuts and a reduction in global production capacity. Honda CEO Toshihiro Mibe acknowledged this, stating that while some may see the deal as Honda supporting Nissan, the merger is "based on the assumption that Nissan completes its turnaround action." He further emphasised, "If Nissan and Honda fail to stand on their own feet the business integration talks will not come to fruition." Nissan CEO Makoto Uchida, meanwhile, maintained that the talks do "not mean we have given up on a turnaround" but are about ensuring future competitiveness through partnerships.
Key factors influencing the merger discussions include the need for increased scale to compete in the development of new technologies, particularly in the EV sector. Honda CEO Toshihiro Mibe said the companies needed greater scale to compete in the development of new technologies in electric vehicles and intelligent driving.
The integration is expected to create synergies across various operations. These include standardising vehicle platforms to reduce costs and improve development efficiency, integrating R&D functions to accelerate technological advancements, and optimising manufacturing facilities to improve capacity utilisation. The companies also anticipate benefits from streamlining supply chains, integrating back-office operations, and combining sales finance functions.
The companies have outlined a tentative timeline for the merger process. A board resolution and execution of the MOU are planned for December 23, 2024. A definitive agreement is expected in June 2025, followed by shareholder meetings in April 2026.
Under the proposed structure, Honda, the larger and more profitable of the two, will nominate a majority of the directors for the new holding company, including the chief executive. This suggests, as the provided text notes, that the merger is "unlikely to be a marriage of equals." Further details on the holding company's structure and management will be determined in the coming months. Former Nissan boss Carlos Ghosn, speaking from exile, said that Nissan turning to arch-rival Honda showed that they were in "panic mode", adding "Although the two companies might be able to 'find synergies for the future... I don't see anything obvious into this partnership or this alliance'."
The discussions between Honda and Nissan represent a significant development in the automotive industry. The potential merger will be subject to shareholder and regulatory approvals. If successful, the integration will create a major player in the global automotive market and impact the competitive landscape, particularly in the EV sector. As Peter Wells, professor at Cardiff Business School, noted, Nissan has "been struggling in the market, it's been struggling at home, it doesn't have the right product line-up." He added, "There are so many warning signs, so many red flags around Nissan at the moment that something had to happen. Whether this is the answer is another question."