Honda and Nissan Officially in Talks to Merge Into World’s Third-Largest Automaker

Are you ready for the Hondissaince? Or is it the Nissondaissance?

Spurred by “the rise of Chinese power,” Japanese automakers Honda and Nissan announced Monday that they are in talks to merge. A successful agreement would see the creation of the world’s third-largest automaker and lay the groundwork for a plan to “fight back” against the competition that Honda CEO Toshihiro Mibe said would be in place by 2030. Off to the races.

In It for the Long Haul

Mibe emphasized that this is no short trek. Honda and Nissan would, if all goes as planned, merge their operations under a joint holding company. Honda, which would contribute $43 billion to the combined $54 billion market cap based on current valuations, would head up the new management. But executives expect discussions to run until June 2025 and a listing of the new entity on the Tokyo Stock Exchange would not happen until August 2026.

“The chance of this not being implemented is not zero,” said Mibe, who said a merger would be a complex medium-to-long term project that would start to yield significant results in years, not months. Then there’s the matter of Nissan, which has struggled of late:

• Nissan reported a $61 million loss in the third quarter, followed by an announcement that it was laying off 9,000 people and reducing its global production capacity by a fifth. To ward off the suggestion that Honda was pulling too much weight, Mibe noted the merger will be “based on the assumption that Nissan completes its turnaround.”
• Honda made a net profit of $3.25 billion in the first half of its current fiscal year, a 20% decline from a year earlier. One major culprit was China sales, which fell 29% in its July to September quarter. Nissan has similarly struggled in the Middle Kingdom, with a 14.3% drop in China sales in the first half of the fiscal year.

The “fight back” plan Mibe alluded to would address Honda and Nissan’s eroding China market share, with both ceding ground to popular electric vehicles, hybrids and plug-in hybrids made by Chinese brands like AIC Motor, FAW Group, BAIC Motor, and Dongfeng Motor.

Three’s Company: The merger could end up forming something of a triumvirate of well-known brands, as it may also include Mitsubishi. Nissan is the top shareholder of the Outlander-maker, which has been invited to join the new group — the timeline for that decision is the end of January. Honda’s US-listed shares rose over 12% Monday, in a pre-Christmas gift for the Civic-maker’s shareholders.