Honda and Nissan announced on Monday that they are in discussions to merge by 2026, marking a historic shift for Japan’s auto industry amid rising competition from Chinese electric vehicle (EV) manufacturers. If finalized, the merger would form the world’s third-largest automotive group by vehicle sales, following Toyota and Volkswagen, according to Statista data. This partnership would provide both companies with greater scale and the opportunity to pool resources, enabling them to better compete as global consumers increasingly transition from traditional gas-powered vehicles to EVs.
Honda and Nissan’s sales slumps have heightened fears that they are losing ground to EV disruptors like China’s BYD and U.S. market leader Tesla. But the Japanese companies said a merger could allow the pair to pool resources in areas such as developing and building EV batteries and developing new software for vehicles that can be updated over the air, like smartphones.
They said the move may boost profits in the short term by reducing development costs and allowing them to cut prices on some models. They would also seek to speed up the production of electric vehicles. “We will pursue the unification of management and business operations while retaining our principles and brands,” Honda president Toshihiro Mibe said.
The two companies said the deal will be finalized by June and establish a holding company that will list its shares in August 2026. They added that the larger Honda, which has a market value of more than $40 billion, will appoint most of the holding company’s board members.
Nissan and Honda also plan to form a joint venture in the electric car supply chain. They will start by making batteries and motors together, but a source familiar with the matter said they plan to expand their partnership in the future. It will focus on developing new battery technologies that are cheaper and lighter than current lithium-ion technology, which most EVs use.
Both companies have been struggling to compete with EVs from newcomers, including Tesla and China’s BYD, and newer hybrid and electric vehicles loaded with innovative features. The companies have been cutting production and focusing on electric vehicles.
The tie-up follows a meeting last week in Tokyo between Honda and Nissan’s more minor alliance partner, Mitsubishi Motors Corp. (7267.T). The two companies plan to hold a press conference after board meetings on Monday, with Mitsubishi expected to join.
Nissan and Mitsubishi have an advantage over Honda in the area of truck-based body-on-frame large SUVs, which offer enormous towing capacities and off-road capabilities, according to Sam Fiorani, vice president at Auto Forecast Solutions. The companies also have strengths in fuel-efficient engines and gas-electric hybrid powertrains. However, the deal could be complicated if U.S. policymakers impose restrictions on imported Chinese EVs. Those include restrictions that might prevent them from qualifying for lower import duties or even be banned altogether on national security grounds.
