There have been rumors for a long time, but now it is clear: the two companies Honda and Nissan want to forge the third largest car manufacturer in the world. Japanese automakers signed an agreement in principle for merger talks on Monday, according to a joint news conference in Tokyo. Honda also said it would buy back up to 1.1 trillion yen ($7 billion) of its own shares. The plan is to set up a holding company to house the new company and be listed on the stock exchange by August 2026. Honda will be able to appoint the majority of the holding company’s directors, it said. Honda and Nissan want to complete negotiations by June 2025. Mitsubishi, which is 24.5 percent owned by Nissan, has also signed the letter of intent and will be part of the group. The alliance would create the world’s third-largest automaker, pitting the trio against Toyota domestically and Chinese automakers abroad like BYD and Geely compete. Toyota has stakes in Subaru, Suzuki and Mazda and has thus created a brand package that is supported by a very good credit rating.
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Rising popularity of domestic electric cars in ChinaAll three Japanese companies are threatened by the global automotive industry’s rapid shift towards battery-powered electric vehicles and hybrid powertrains and away from internal combustion engine vehicles. In China, foreign brands are fighting for survival due to the increasing popularity of domestic electric vehicles, and Japanese car manufacturers have too much capacity there. Honda and Nissan have had to cut both staff and production, while Mitsubishi has almost completely withdrawn from China, the world’s largest auto market. Meanwhile, the surge in hybrid-electric car sales in North America has put Nissan on the defensive, while Toyota , a pioneer in hybrid technology, is experiencing a resurgence. Nissan missed this opportunity because the company’s aging product offering lacked attractive hybrid options, let alone competitive electric vehicles.Read moreFor Nissan, the merger with Honda could provide some much-needed relief after weak sales in the U.S. and China led to massive declines have led to a decline in sales, forcing the struggling automaker to cut jobs, cut production capacity and reduce annual profit prospects by 70 percent.Nissan was rescued by Renault two decades ago It was rescued from its last financial crisis more than two decades ago when French car maker Renault stepped in with a cash injection and dispatched Carlos Ghosn to turn things around. Ghosn’s surprise arrest and dismissal at the end of 2018 paved the way for Makoto Uchida to take the helm. Nissan and Honda had already announced in March that they would cooperate on the development of electric vehicles and software technologies in order to reduce their costs and improve their competitiveness. Mitsubishi joined these discussions in August. “Honda and Nissan have begun to consider business integration and will explore creating significant synergies between the two companies in a variety of areas,” said Honda CEO Makoto Uchida. It is significant that Nissan – Mitsubishi’s largest shareholder – is also involved in these discussions, it said.
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