Honda and Nissan Consider Merger to Compete with Toyota and Global Electric Vehicle Rivals

Honda Motor Co. and Nissan Motor Co. are in discussions about a potential merger or strategic alliance to strengthen their competitive position in the global automotive market, particularly in the electric vehicle (EV) sector. This move is seen as a decisive step to challenge Toyota Motor Corp., the world’s largest automaker, while also increasing their ability to compete with strong rivals like Tesla and Chinese car manufacturers.

According to Bloomberg sources, the two companies are exploring options including a full merger, capital alliance, or the creation of a joint parent company. Although the talks are still in the early stages, a memorandum of understanding (MoU) could be signed by December 23. If successful, this merger would split the Japanese automotive industry into two main pillars: the Toyota alliance with partners like Subaru, Suzuki, and Mazda, and the new alliance consisting of Honda, Nissan, and Mitsubishi.

In an increasingly competitive global market, scale has become a key factor. Data shows that in the first half of 2024, Honda, Nissan, and Mitsubishi together sold only 4 million vehicles globally, while Toyota alone achieved 5.2 million units. A merger would allow the two automakers to share production costs, optimize investments in technology, and accelerate market expansion. However, even combined, the market capitalization of Honda (6.8 trillion yen) and Nissan (1.3 trillion yen) would still fall short of Toyota’s 42.2 trillion yen.

For Nissan, an alliance with Honda would provide the necessary short-term solution to address its financial difficulties. Since the scandal involving former chairman Carlos Ghosn in 2018, Nissan has faced stagnant revenue growth and intense pressure to restructure. Analysts believe that a merger would help Nissan regain stability while boosting its efforts to recover profitability. Meanwhile, Honda stands to gain from the scale expansion, as it has struggled to secure the necessary resources for significant investments in new technologies. An alliance with Nissan would enhance Honda’s competitiveness, especially as the company shifts its focus towards the development of electric and hybrid vehicles.

The two automakers have already begun collaborating in the areas of battery and EV software earlier this year, but the alliance could go further to meet the pressures from the market. As Tesla and Chinese manufacturers expand aggressively, the merger is expected to help Honda and Nissan maintain their market share while maximizing their resources to develop new technologies.

However, a merger also presents significant challenges. Business overlap and post-merger management issues would be major barriers to overcome. Experts warn that coordinating two brands with different historical developments and corporate cultures will require clear and effective strategies.

Despite the risks, the potential of an alliance between Honda and Nissan is substantial. If successful, it would not only mark a turning point in strengthening the two companies' positions in the global market but also bring about a comprehensive restructuring of the Japanese automotive industry, creating a formidable counterweight to Toyota and international competitors in the electric vehicle race.