BREAKING: Honda and Nissan Delve into Preliminary Merger Negotiations to Navigate EV Market Challenges

Honda and Nissan, two titans of Japan’s automotive industry, are reported to be engaged in initial deliberations concerning a potential merger. This strategic move is being explored as a means to fortify their position amidst mounting competition from electric vehicle (EV) manufacturers, particularly in the burgeoning Chinese market.

The discourse remains at a rudimentary phase, with no assurance of an agreement materializing, according to sources familiar with the situation cited by BBC News. In March, the automakers signaled their intent to collaborate by committing to a strategic partnership centered around EVs—a preliminary step toward deeper cooperation.

In identical statements issued to the BBC, the companies remarked:
"As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths."

Although neither firm has outright confirmed the ongoing merger talks, first reported by the Nikkei, both have refrained from denying the reports. They emphasized that the matter remains unpublicized, assuring stakeholders that any substantive updates will be disclosed in due course.

Japanese broadcaster TBS suggests that formal acknowledgment of the discussions may occur as early as next week. Meanwhile, Nissan opted not to comment on a Bloomberg report alleging that Foxconn, the technology conglomerate behind Apple’s iPhone production, had approached it regarding acquiring a controlling stake. Foxconn has yet to respond to such claims.

Bringing together Japan’s second and third-largest automakers poses significant challenges. Any potential merger would likely face intense political scrutiny within Japan, primarily due to concerns over potential job redundancies. Furthermore, Nissan’s existing alliance with French automaker Renault would necessitate disentanglement, adding another layer of complexity to the negotiations.

Honda and Nissan have steadily expanded their collaboration in recent months. Following their March announcement, they deepened their alliance in August, agreeing to collaborate on battery technology and other EV advancements. In the same month, they also signed an agreement with Mitsubishi Motors to explore synergies in electrification and intelligent technologies.

Nikkei further reports that Mitsubishi, in which Nissan holds a significant stake, may eventually be drawn into the partnership, creating a more extensive coalition.

This speculation has influenced market movements, with Nissan shares surging over 23% in Tokyo on Wednesday, Mitsubishi shares climbing nearly 20%, and Honda experiencing a modest 3% decline.

The discussions come as automakers globally grapple with the industry’s transition from internal combustion engines to electric drivetrains. This shift has been accelerated by China’s dominance in EV production and the proliferation of competitive manufacturers.

Jessica Caldwell, an analyst at Edmunds, commented on the challenging landscape:
"The idea that some smaller players can persist and prosper is becoming increasingly tenuous, especially given the influx of robust competition from Chinese manufacturers."

For Honda and Nissan, survival in the EV era is not just a matter of adaptation but also of financial viability in a high-stakes market.

Both companies have been losing market share in China, a critical market that accounted for nearly 70% of global EV sales as of November. Despite their combined global sales of 7.4 million vehicles in 2023, they are struggling to contend with cost-competitive EV players like BYD, whose recent financial results outpaced Tesla for the first time in October.

Jesper Koll, a senior advisor at Monex Group, questioned the strategic value of the merger:
"Is this merely an exercise in rearranging the deck chairs on the Titanic? Neither Honda nor Nissan currently possess the products or innovations that resonate with global consumers."

From this perspective, while the merger may represent a tactical lifeline, it falls short of fostering a transformative industry leader.