Honda and Nissan eye merger to form world’s third-largest auto group

Honda (7267.T) and Nissan (7201.T) are set to announce on Monday plans to explore a potential merger by establishing a joint holding company, aiming for a finalized deal by June 2025.

The consolidation would create the world’s third-largest auto group by vehicle sales, trailing only Toyota (7203.T) and Volkswagen (VOWG_p.DE), as legacy automakers contend with growing competition from Tesla (TSLA.O) and Chinese rivals, according to Reuter's sources.

The proposed merger would reshape the global auto industry, marking the largest restructuring since Fiat Chrysler Automobiles and PSA merged in 2021 to form Stellantis in a $52 billion deal. If Mitsubishi Motors (7267.T) is included in the merger, the Japanese group’s global sales would exceed 8 million vehicles, surpassing Hyundai and Kia.

However, the plan faces skepticism from former Nissan Chairman Carlos Ghosn, who criticized the move “There is duplication everywhere,” he said, arguing that the lack of complementarity between the two companies would undermine the merger’s success. Speaking from Lebanon, where he resides after fleeing Japan in 2019 to avoid trial for financial misconduct, Ghosn said he personally doubted the merger would work.

The integration plan outlines the establishment of a holding company by August 2026, which will be listed on stock exchanges while Honda and Nissan delist.

Honda will appoint the majority of the board members, including the company’s leader. The joint initiative follows months of discussions on collaboration in electrification, software development, and joint research, which were expanded to include Mitsubishi Motors in August.

Despite optimism in the stock market — with Honda shares rising 3.8%, Nissan 1.6%, and Mitsubishi 5.3% — the companies face challenges. Both automakers have struggled in the Chinese market, where BYD (002594.SZ) and other local brands dominate with electric and hybrid vehicles.

Last month, Nissan announced plans to cut 9,000 jobs and reduce global production capacity by 20% after declining sales in China and the U.S., while Honda also reported weaker-than-expected earnings due to similar pressures.

French automaker Renault (RENA.PA), Nissan’s largest shareholder, has expressed openness to the merger in principle but will assess its implications carefully. Meanwhile, Taiwan’s Foxconn (2317.TW) paused a potential bid for Nissan after meetings with Renault in France, highlighting the complex dynamics of the evolving auto industry.

The planned merger reflects a broader trend of consolidation as automakers strive to adapt to the rapid transformation of the global market, driven by electrification, technological innovation, and shifting consumer preferences.