Japanese automobile brands Honda and Nissan are considering a potential merger to help them compete with Electric Vehicle (EV) makers, particularly in China.
The two Japanese car makers in March agreed to explore a strategic partnership for EVs.
In a joint statement on Tuesday, the companies confirmed ongoing discussions but withheld specifics, including a timeline or details of what the merger might entail.
The statement reads, “As announced in March, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths. If there are any updates, we will inform our stakeholders at the appropriate time.”
This development is prompted by car brands grappling with growing competition as the industry shifts from petrol and diesel vehicles to electric, with production in China booming.
Honda and Nissan have not denied the story, which was first reported by the Japanese business newspaper the Nikkei, but said it was “not something that has been announced by either company”.
The discussions are understood to be in the early stages and there is no guarantee that a deal will be agreed.
The two companies are expected to officially confirm that they have held the talks as early as next week, according to Japanese TV channel TBS.
A potential merger between Japan’s number two and number three car manufacturers could be complicated for several reasons, according to BBC.
Any deal is likely to come under intense political scrutiny in Japan as it may lead to major job cuts. Nissan is also likely to be faced with unwinding its alliance with French vehicle manufacturers, Renault.
Honda and Nissan agreed in March to cooperate in their EV businesses, and in August deepened their ties, agreeing to work together on batteries and other technology.
Also in August, the two companies announced an agreement with Mitsubishi Motors to discuss intelligence and electrification.
The Nikkei also reported that Nissan and Honda may eventually bring Mitsubishi into any potential partnership. Nissan is Mitsubishi’s biggest shareholder.
Nissan shares rose more than 23% in Tokyo on Wednesday while Honda shares fell about 3%, while Mitsubishi’s jumped by almost 20%.
“The thought that some of these smaller players can survive and thrive is getting more challenging, especially when you add on the complexity of all the additional Chinese manufacturers who have come in and are competing quite strongly,” said Edmunds analyst Jessica Caldwell.
“It’s just sort of necessary to survive, not only to survive, but also just to afford the future.”
Honda and Nissan have been losing market share in China, which accounted for almost 70% of global EV sales in November.
The two brands had combined global sales of 7.4 million vehicles in 2023, but are struggling to compete with cheaper EV makers such as BYD, which has seen its quarterly revenues soar, beating Tesla’s for the first time in October.
