Honda-Nissan Merger In 2026 To Create World's 3rd Largest Car Group

Honda and Nissan announced on Monday that they are in discussions to merge by 2026, marking a historic shift in Japan’s automotive sector. The merger would create the world’s third-largest car group by vehicle sales, following Toyota and Volkswagen. The move comes as both companies face increased competition from electric vehicle (EV) manufacturers, particularly Tesla and China’s rising EV makers, such as BYD.

The potential merger of Honda, Japan’s second-largest automaker, with Nissan, its third-largest, would represent the most significant transformation in the global automotive industry since Fiat Chrysler Automobiles and PSA merged in 2021 to form Stellantis in a USD 52 billion deal. Mitsubishi Motors, in which Nissan is the largest shareholder, may also join the merger, with a decision expected by the end of January, according to the companies.

The CEOs of Honda, Nissan, and Mitsubishi Motors held a joint press conference in Tokyo to discuss the development. Honda CEO Toshihiro Mibe highlighted the impact of Chinese automakers and new industry players, stating, "The rise of Chinese automakers and new players has changed the car industry quite a lot... We have to build up capabilities to fight with them by 2030, otherwise we'll be beaten."

The merger aims for combined sales of 30 trillion yen (USD 191 billion) and operating profits exceeding 3 trillion yen. Both companies aim to finalize their talks by June 2025 and establish a holding company by August 2026, at which point shares of both companies would be delisted. Honda, which has a market capitalization of over USD 40 billion—four times that of Nissan—will have a majority of board seats in the new entity.

By combining with Mitsubishi Motors, the Japanese group’s global sales would surpass eight million cars, positioning it ahead of Hyundai and Kia as the third-largest carmaker globally. Honda and Nissan have been deepening their partnership, with talks of cooperation in electrification and software development. In March, both companies discussed expanding collaboration, which was later extended to include Mitsubishi in August.

Despite this, both automakers have faced challenges. Nissan recently announced plans to cut 9,000 jobs and reduce global production by 20 per cent after facing a sharp decline in sales in key markets such as China and the US Honda, on the other hand, reported disappointing earnings due to a slump in China, though its motorcycle and hybrid car segments have helped maintain financial stability.

Honda's Mibe emphasized that the merger is not a "rescue of Nissan," adding that Nissan's business turnaround is a "prerequisite" for the merger. Both companies have struggled in China, where domestic EV makers like BYD have gained significant ground with innovative electric and hybrid cars.

In a separate online press conference, former Nissan chairman Carlos Ghosn, who remains a fugitive in Lebanon after fleeing Japan while facing charges, expressed doubt about the success of a Honda-Nissan merger. He argued that the two automakers were not complementary. Meanwhile, Renault, Nissan's largest shareholder, indicated that it would "discuss with Nissan and consider all possible options" regarding the merger.

Sources revealed that Taiwan’s Foxconn, looking to expand its EV manufacturing business, had approached Nissan with a bid, but Nissan rejected the offer. Foxconn paused its approach after meeting with Renault in France.

Nissan CEO Makoto Uchida denied that Foxconn's actions had influenced the merger talks with Honda, while Mibe stated that Honda’s relationship with General Motors would remain unaffected.

Following the announcement of the merger talks, shares of Honda rose by 3.8 per cent, Nissan gained 1.6 per cent, and Mitsubishi Motors saw a 5.3 per cent increase, while Japan's benchmark Nikkei index closed up 1.2 per cent.