Honda and Nissan Merger: Everything You Need To Know

Honda and Nissan have announced official plans to merge.

The agreement seeks to consolidate a wide range of resources from platform sharing to supply chain systems in order to bolster the position of Japanese automakers in a rapidly evolving automotive market dominated by electrification and ongoing industry consolidation.

Under the agreement, Honda and Nissan will form a joint holding company, where both companies will be wholly owned subsidiaries of the holding company. Honda, the stronger entity in this arrangement—with about 4x Nissan's market cap—will take a leading role, including nominating the majority of the board for the new company. Mitsubishi, of which Nissan holds a 24.5% stake, is expected to join the alliance pending further deliberations.

Honda CEO Toshihiro Mibe described the plan as a move to strengthen both companies while maintaining their unique brands and corporate identities. The holding company will also house Honda’s lucrative motorcycle division, further expanding its portfolio. Honda concurrently announced a $7 billion share buyback, signaling confidence in its financial health even as it prepares for the merger.

Challenges Driving the Merger

The collaboration is driven by mounting challenges from the Chinese market, where local EV manufacturers like BYD have dominated. Japanese automakers, including Honda and Nissan, have struggled with excess production capacity and declining sales in China, the world’s largest car market. Mitsubishi has already scaled back its operations in the region.

Nissan, in particular, faces dire circumstances globally. Declining sales in the U.S. and China have forced the company to cut jobs and slash production. Its annual profit outlook has been downgraded by 70%. Nissan CEO Makoto Uchida defended the decision: "Partnering with Honda isn’t a sign that we’re giving up on our plans to turn Nissan around.”

Honda, while in a better financial position, views the merger as a means of achieving the scale required to remain competitive in a global industry increasingly dominated by large, consolidated players.

Foxconn’s Interest and Renault’s Role

The merger talks came as Taiwan’s Foxconn, known for its expertise in electronics manufacturing, expressed interest in acquiring Nissan. Reports suggest Foxconn approached Renault, Nissan’s largest shareholder, about a potential deal.

Renault’s involvement adds complexity. As a 36% stakeholder in Nissan, the French automaker holds significant sway over any merger or acquisition plans. Renault has signaled tentative support for the Honda-Nissan deal, emphasizing the need for scale in the evolving automotive landscape. Stellantis was a canary in the coalmine of things to come.

The Road Ahead

Significant challenges remain, including resolving production inefficiencies, integrating corporate cultures, and addressing declining sales in key markets.

"This is not a rescue of Nissan," Honda's Mibe said, adding that Nissan must turnaround its business as a "prerequisite" for the merger.

The two companies will aim for combined sales of $191 billion and operating profit of nearly $20 billion through the potential merger. All the details should be established by June 2025 before the holding company is established by August 2026, when shares of both companies would be delisted.

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