Historic deal could be world's third-largest car group, challenging global competitors in electric vehicles.
Honda (7267.T) and Nissan (7201.T) said Monday they are in negotiations to merge by 2026, a move that will reshape Japan's automotive landscape. The combined company would become the world's third-largest automaker by vehicle sales, after Toyota (7203.T) and Volkswagen (VOWG_p.DE), combining their strengths in a bid to take on a rising challenge from Chinese electric-vehicle manufacturers like BYD.
Honda, Japan's second-largest carmaker, and Nissan, the third, want to form a more powerful entity with a combined revenue target of ¥30 trillion ($191 billion) and operating profit exceeding ¥3 trillion. Mitsubishi Motors (7211.T), partly owned by Nissan, may also join the alliance, boosting global sales to more than 8 million cars annually. The merger would rival Hyundai (005380.KS) and Kia (000270.KS) as the third-largest car group globally.
It's a response to the industry's increasingly rapid technological changes, like electrification and autonomous driving. Honda's CEO, Toshihiro Mibe, believes that "it's necessary that these two companies grow together to take on the likes of Tesla (TSLA.O) and nimbler Chinese competitors".
The deal is expected to be sealed by 2025, with shares of both companies delisted by August 2026. While financial woes on both sides haunt the automakers - a slumping sales situation in China and the U.S. for one - Honda insists that the merger is not a "rescue" of Nissan, though a business turnaround is essential for the deal to proceed.
Post that, Honda, Nissan and Mitsubishi Motors shares rose upon the reports as an indicant of investment optimism to the potential tie up.
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