Honda to merge with Nissan by middle of 2026

Honda and Nissan have agreed to merge, which, if everything goes according to plan, will see the two automakers become one by the middle of 2026.

Spurred by Nissan’s precarious financial position, the continuing rise of Chinese automakers, and the enormous cost of developing large scale electric vehicle platforms, Honda and Nissan will join forces to become, potentially, the world’s third largest car manufacturer.

In a press conference fronted by Makoto Uchida, Nissan’s CEO, Toshihiro Mibe, Honda’s CEO, and Takao Kato, CEO of Mitsubishi Motors, the automakers said Honda and Nissan have signed a memorandum of understanding formally kicking off work on a merger between Japan’s second largest (Honda) and third largest (Nissan) automakers.

Timeline for a potential mega-merger

As Honda in a much stronger financial position — its market capitalization is four times that of Nissan’s, and it is still profitable — it will nominate a majority of the combined automaker’s board, and the top executive positions will be occupied by Honda nominees.

According to the timeline laid out by the two car companies, a definitive agreement laying out the specifics of the merger, including share transfers, will completed by June 2025. Shareholders in both firms will then vote on the merger in April 2026.

Assuming approval is given, Honda and Nissan will be delisted from the Tokyo Stock Exchange by late July or early August 2026, with a new holding company taking their place.

Mitsubishi Motors will decide on whether it will join the Honda-Nissan merger by the end of January 2025. Nissan is currently the largest shareholder in Mitsubishi Motors, but due to its recent financial troubles recently sold off some of its stake, and no longer holds a controlling 34 per cent stake.

Based on 2023 sales figures, the merged Honda-Nissan entity would be the world’s third largest automaker by volume. Their combined sales of 7.35 million vehicles would take it past Hyundai-Kia, which sold 7.31 million cars last year.

Mitsubishi’s potential entry into the merger would see roughly 900,000 added to combined automaker’s numbers, pushing comfortably past Hyundai-Kia, but still behind Toyota and Volkswagen.

Should current capitalisation rates hold, the Honda Nissan merger could eclipse the US$52 billion (A$83bn) merger of PSA (Peugeot-Citroen) and Fiat Chrysler to form Stellantis in 2021.

When, or if, the Honda Nissan merger takes place, it will consolidate Japan’s automakers into two key clear blocs with Honda-Nissan-Mitsubishi on one side, and Toyota on the other. Toyota, the world’s number one car maker, owns Daihatsu and Lexus outright, has minority shareholdings in Subaru, Suzuki, and Mazda.

Why now?

Speaking to the press, Honda CEO Toshihiro Mibe said the combination “is not a rescue of Nissan”, and Nissan getting its house in order was a “prerequisite” for the merger.

Last month, red ink began to flow at Nissan, and the company said it was entering “emergency mode” with plans to reduce production capacity by 20 per cent and fire 9000 workers.

Since then rumours have swirled about merger talks between Honda and Nissan. The long-standing rivals began discussions on joint projects in March this year, before confirming in August they and Mitsubishi would collaborate on electric vehicles and intelligence.

According to Reuters, Taiwan’s Foxconn, the contract manufacturer famed for building the Apple iPhone, approached Nissan about a bid, but was rejected by the automaker.

Both Honda and Nissan, like many other automakers, including Volkswagen, have been hit hard by the surge in demand for local brands in China, which has been largely driven by electric vehicles developed by domestic manufacturers, such as BYD, SAIC and Geely.

Honda’s motorcycle business, strength in hybrid power, and comfortable position in the US market, especially with private buyers, have helped it weather the storm so far. Nissan, with its lack of hybrid models in North America, and more bargain-focussed position, has sales suffer and stockpiles grow.

Synergies and potential pitfalls

Honda and Nissan envisage the combined firm eventually having annual revenue of ¥30 trillion (A$310bn), and turning an operating profit of over ¥3 trillion (A$30bn).

There could a lot of short term pain, though, with Mibe-san cautioning the combined automaker will only see significant gains starting in 2030.

In the medium term, Honda and Nissan will combine platforms in order lower costs for both brands by increasing scale, and reducing research and development costs.

Both manufacturers are currently working on new EV architectures for vehicles slated to appear later this decade. One of these platforms may need to be shelved, causing potential delays for one brand.

The research and development departments will also be brought together, which some industry analysts believe could lead to some corporate culture clashes. Other cost savings will come from combining back office operations, such as marketing, HR and IT.

Plant closures are likely with the automakers looking at “optimising manufacturing systems and facilities” through the “shared use of production lines”.

During the press conference Mibe-san was keen to point out the merger won’t be solely focussed on “just carving out, carving out, carving out and leaving only the good parts”.

He said the new company will be keen “to think about options that lead us to bigger scale”, and dangled the thought bubble of combining Honda’s strength in hybrid drivetrains with Nissan’s knowledge of body-on-frame architectures to create a hybrid ute.

It’s unknown at this stage what the combined Honda Nissan will be known as, nor do we know how it plans to differentiate its two main brands. There’s a significant amount of model and geographic overlap for both companies, with Honda and Nissan deriving 37 per cent of their sales from the North American market.

While Honda has a stronger presence in China and Asia, Nissan has a significantly larger market share in Europe. The two automakers each have a significant foothold Japan’s kei car market.

Although the automakers say they will continue “developing the brands held by Honda and Nissan equally”, there will surely be debate about the eventual fate of their luxury brands, Acura and Infiniti. Both of which are struggling for sales, and have largely retreated to their North American base.

While Nissan’s relationship with Renault has unravelled spectacularly since the arrest of former CEO Carlos Ghosn in 2018, the two still have shared platforms, purchasing agreements, and some shared models, primarily vans for the European market.

At the height of their alliance, Renault had a 44 per cent stake in Nissan. As part of the reimagined Renault-Nissan-Mitsubishi Alliance announced in early 2023, Renault agreed to slowly sell down its shareholding in Nissan to 15 per cent, while Nissan finally gained voting rights at Renault.

Honda, on other hand, has been working closely with GM on hydrogen fuel cell research and development, and currently sells the Honda Prologue and Acura ZDX electric crossovers in North America, both of which are produced by GM, and feature Honda-developed bodies and interiors mounted on a GM-designed EV architecture.

The last time Honda owned a significant portion of another automaker was in the 1980s and 1990s when it had a 20 per cent stake in the Rover Group. It eventually sold out in 1994 when BMW purchased the other 80 per cent of Rover from British Aerospace.

Mibe-san said after the merger Honda will continue its work with GM. Likewise Uchida-san said Nissan will continue working with Renault on a “project basis” whenever there are synergies available.

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