Written by Maki Shiraki
TOKYO (Reuters) – Honda and Nissan have agreed to consider merging and establishing a joint holding company, which would create the world's third-largest automaker and signal a massive shift in an industry witnessing massive upheaval. .
The companies aim to achieve combined sales of 30 trillion yen ($191 billion) and operating profits of more than 3 trillion yen through the potential merger, the companies said in a statement.
They aimed to conclude the talks around June 2025 and then create a holding company by August 2026, at which time the shares of both companies would be delisted.
The merger would then create the world's third-largest automobile group by car sales Toyota (NYSE:) and Volkswagen (ETR:) as legacy automakers face increasing challenges from Tesla (NASDAQ:) and Chinese rivals.
Honda (NYSE:), Japan's second-largest automaker after Toyota, has a market capitalization of more than $40 billion, while third-place Nissan is valued at about $10 billion.
She added that Honda will appoint the majority of the members of the holding company's board of directors.
The merger of the two Japanese brands would mark the biggest reshaping of the global automobile industry since then Fiat (BIT:) Chrysler Automobiles and PSA merged in 2021 to create Stellantis (NYSE:) in a $52 billion deal.
The merger with Mitsubishi Motors (OTC:) would raise the Japanese group's global sales to more than 8 million cars. The current No. 3 group is South Korea's Hyundai (OTC:) and Kia.
Reuters reported last week that Honda and Nissan are exploring ways to strengthen their partnership, including a merger.
The two companies said in March that they were studying cooperation in the field of electricity and software development. They agreed to conduct joint research and expand cooperation to include Mitsubishi Motors in August.
Last month, Nissan announced a plan to cut 9,000 jobs and 20% of its global production capacity after a decline in sales in key markets in China and the United States. Honda also reported worse-than-expected earnings due to lower sales in China.
Like other foreign automakers, Honda and Nissan have lost ground in China, the world's largest market, amid the rise of BYD (SZ:) and other domestic brands that make electric and hybrid cars loaded with innovative software.
In a separate online news conference with the Foreign Correspondents Club of Japan on Monday, former Nissan Chairman Carlos Ghosn said he did not believe the Honda-Nissan alliance would be successful, saying the two automakers were not complementary.
Ghosn is a wanted fugitive in Japan on charges of skipping bail and fleeing to Lebanon. His arrest in 2018 on charges of financial violations plunged Nissan into crisis.
French car manufacturer Renault Sources said that EPA, Nissan's largest shareholder, is open in principle to a deal and will study all implications of the alliance.
Taiwan Foxconn Sources told Reuters that SS, which is seeking to expand its emerging business in the field of contract manufacturing of electric cars, approached Nissan about an offer, but the Japanese company rejected it.
Bloomberg News reported on Friday that Foxconn decided to pause this approach after it sent a delegation to meet with Renault in France.
Honda shares ended the day up 3.8%, Nissan shares rose 1.6%, and Mitsubishi Motors shares gained 5.3% after news reports about details of the planned merger, while the benchmark index rose 1.2%.
($1 = 156.7000 yen)
