Honda and Nissan have signed a memorandum of understanding to initiate discussions on what could become the largest domestic merger in Japanese automo
Honda and Nissan have signed a memorandum of understanding to initiate discussions on what could become the largest domestic merger in Japanese automotive history. If successful, the merger would result in the world’s third-largest carmaker by sales.
At a press conference in Tokyo, the companies announced plans to finalize a merger agreement by June 2026, with completion targeted for later that year. The talks may also include Mitsubishi Motors, which has been allied with Nissan since 2016. Mitsubishi has signed a separate memorandum of understanding and will decide next month whether to join the discussions.
The potential merger highlights the growing need for consolidation in Japan’s car industry as it faces challenges from rising Chinese competition and the global shift toward electrification and autonomous driving. Honda CEO Toshihiro Mibe emphasized the importance of adapting to a “drastically changing business environment,” while Nissan CEO Makoto Uchida noted the necessity of scaling up to compete with new market entrants.
Under the proposed plan, Honda and Nissan would come under a single holding company, which would be listed on the Japanese stock exchange in 2026. Based on current market capitalizations, the combined entity would be valued at $54 billion, rising to $58 billion if Mitsubishi joins. However, even with this valuation, the new group would still be significantly smaller than Toyota, valued at $287 billion.
Despite their size difference, Mibe dismissed the notion that the merger is a bailout for Nissan, which has struggled with profitability. “This is not about saving Nissan,” Mibe stated. “We are focused on the benefits integration can bring.”
The merger’s success hinges on substantial cost-saving measures, including factory closures and job cuts. The companies aim to double their operating profit to ¥3 trillion, up from the current forecast of just over ¥1.5 billion. They also plan to share vehicle platforms, co-produce vehicles, and pool resources to accelerate investments in electric vehicles, software, and autonomous driving technologies.
Honda and Nissan have discussed the plans with Japan’s Ministry of Economy, Trade, and Industry, which supports the merger as part of its broader mission to protect Japan’s industrial base. The ministry initially proposed the idea of a Honda-Nissan merger in 2019.
Renault, which owns more than a third of Nissan, acknowledged the talks and stated it would consider all options in the best interest of the group and its stakeholders.
If Mitsubishi joins the merger, the combined group would sell over 8 million vehicles annually, ranking behind only Toyota and Volkswagen. The move would also follow a trend of consolidation in the automotive sector, similar to the formation of Stellantis in 2021.
One factor that may have accelerated the talks is the potential competition from Taiwan’s Foxconn, which recently showed interest in the automotive sector. Although Foxconn has since dropped its pursuit, the threat highlighted the urgency for Honda and Nissan to strengthen their positions.
While the merger holds promise, challenges remain. Analysts note that Honda could face resistance internally, and external parties such as Renault would need to approve the deal. Seiji Sugiura, an analyst at Tokai Tokyo Intelligence Laboratory, cautioned that Honda might be underestimating the severity of Nissan’s struggles.
Mibe underscored the significance of the merger, describing it as a “once-in-a-century transformation.” He emphasized the need to prepare for the competitive landscape of 2030, adding, “We need to have the right artillery to win the battle ahead.”
As the talks progress, the automotive industry will closely watch whether this bold step leads to a transformative partnership or encounters insurmountable roadblock.
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