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Honda and Nissan are preparing to unveil more details on Monday of plans for the largest domestic merger in Japan’s auto history, which would create the world’s third-largest automaker by sales and strengthen both companies’ ability to fend off the rise of Chinese rivals.
Japan’s second- and third-largest automakers aim to finalize full details of their merger by June 2025 and complete it the following year, according to two people familiar with the matter.
On Monday, the two companies will sign a memorandum of understanding to enter into merger talks, a step in a consolidation that many analysts and investors say is long overdue in Japan’s auto industry.
Discussions have focused on putting the two automakers under a holding company, people familiar with the matter said. It will be led by Honda, which has a market capitalization roughly four times that of Nissan.
The holding company structure could eventually allow Mitsubishi Motors to join Japanese automaker Mitsubishi Motors Group, which has been aligned with Nissan since 2016.
Honda and Nissan have discussed the outlines of their plans with representatives from Japan’s Ministry of Economy, Trade and Industry, according to government officials. The department floated the idea of a Honda-Nissan merger in 2020.
Economy ministry officials said they did not know which companies would be survivors, but noted that the government’s broader mission includes protecting Japan’s industrial base, meaning it broadly supports a deal that appears to protect that.
Japan’s Minister of Economy, Trade and Industry Yoji Muto said last week that overall he had a “positive attitude toward cooperation between companies aimed at enhancing competitiveness” and that business restructuring was “an effective means of increasing corporate value and creating innovation.”
If Mitsubishi is included in the merged group, its annual vehicle sales will exceed 8 million units, lagging behind domestic rivals Toyota and Germany’s Volkswagen.
According to two people familiar with the matter, the potential takeover threat from Taiwan’s Foxconn, Apple’s largest contract manufacturer for iPhones, is one of the factors prompting the merger of Honda and Nissan.
Foxconn’s electric vehicle unit is led by Jun Seki, who once served as the No. 3 person at Nissan. He has visited Japan in recent months to meet with Ministry of Economy, Trade and Industry officials, but the company has dropped interest, according to two people familiar with the matter.
Analysts said the deal should be seen as a rescue for Nissan, but added that the combined company would achieve greater scale and increase investment in electric vehicles and self-driving software – both of which have Both areas lag behind global competitors.
It marks the latest step in industry consolidation as the industry undergoes sweeping change. The size of the deal will be similar to that of the 2021 merger of France’s PSA and Fiat Chrysler to form Stellantis.
Talks between the two companies are moving toward a full merger faster than expected when electric vehicle and software partnership agreements were signed in March and August.
Former Nissan CEO Carlos Ghosn said at a news conference on Monday that the merger plan “doesn’t make sense” because there is “too much duplication and no complementarity” between the two companies.
