On Monday, Japanese automakers Nissan and Honda announced that they’ve formally entered into discussions surrounding a potential merger. If the merger is successful, it will form the world’s third-largest automaker and has the potential to generate a whopping $191.4 billion in revenue and an operating profit of $19 billion.
In the official press conference, Honda CEO Toshihiro Mibe stressed that the merger is essential for both companies to effectively compete in developing electric vehicles (EV) and intelligent driving. Through a collaborative merger, the companies will share resources, intelligence, and technology to scale up to effectively compete with the rapid intensification of competition within the EV market from competitors such as Tesla and China’s BYD.
A new holding company will be established to serve as the parent company of Nissan and Honda. Due to its larger market capitalization, Honda will nominate most of the new company’s board members.
In addition, the invitation to join the merger has been extended to Mitsubishi, Nissan’s strategy partner. The automaker will take time to discuss internally, and it’s expected that they will come to a final decision at the end of January 2025.
This merger could become a potential lifeline for Nissan, which has struggled with lackluster market performance. In its most recent financial report, Nissan posted a much lower operating profit than Honda, leading to massive layoffs. This merger could be essential to the automaker’s survival.
While negotiations surrounding the proposed merger are still in the early stages, the potential integration of both companies represents a significant shift in the industry as more legacy automakers may explore mergers to absorb the significant costs of EV transitions.
