Honda and Nissan have taken a significant step towards merging to counter the rising competition from Chinese automakers and adapt to rapid changes in the global automotive industry. The two Japanese auto giants have signed a basic agreement to begin discussions on a merger. Mitsubishi will also join the alliance, reports Bloomberg.
As a result of the merger, a holding company will be created, which is expected to be registered by August 2026, according to a joint press conference in Tokyo. Honda will have the majority of directors in the new structure. This merger could create the third-largest automaker in the world, allowing the alliance to challenge Toyota in the domestic market and Chinese competitors such as BYD and Geely internationally.
Honda also announced plans to repurchase its shares worth 1.1 trillion yen ($7 billion), showcasing confidence in its financial stability amid this transformative deal.
Mitsubishi Motors Corp., in which Nissan holds a 24.5% stake, will also join the new group. This expanded partnership will enable the three companies to synchronize efforts, leveraging synergies to overcome industry challenges, including the shift to electric vehicles and hybrids.
For Nissan, this merger could be a lifeline. Declining sales in the U.S. and China have severely impacted the company's revenue, forcing it to cut costs, reduce production capacity, and lower its annual profit forecast by 70%. The company's challenges echo the financial crisis from two decades ago when Renault SA saved Nissan by providing financial support and Carlos Ghosn led the automaker's reorganization. However, in 2018, Ghosn was accused by Japanese prosecutors of financial misconduct, and after his escape from Japan in 2019 in a box meant for musical instruments, he has yet to stand trial. It remains to be seen if the new management of the merged holding company will handle its responsibilities more responsibly.