Nissan Motor and Honda Motor, two of Japan’s largest automakers, are reportedly exploring a merger to stay competitive in the rapidly changing global automotive industry. The deal, which could create the world’s third-largest auto group by vehicle sales, would bring together Nissan, Honda, and Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake.
The merger would allow the companies to pool their assets, save money on costs, and create the technologies they need for the future. However, the deal is expected to face several obstacles, including political scrutiny in Japan due to the potential for job cuts, and the unwinding of Nissan’s alliance with French vehicle manufacturer Renault.
The merger comes at a time when many auto giants are struggling to cope with increased global competition from bigger electric vehicle makers such as Tesla and China’s BYD. Nissan and Honda have previously forged a strategic partnership to collaborate on producing key components for EVs, but a megamerger would be a more significant step towards staying competitive.
Shares of Nissan soared nearly 24% on the news, while Honda shares slipped over 3%. The deal is expected to face several hurdles, including the need for the Japanese government’s blessing and the unwinding of Nissan’s alliance with Renault.
Analysts have expressed concerns about the likelihood of the deal, citing the potential for job cuts and the need for the companies to clarify their capital relationships and restructuring plans. However, some have described the merger as a “really important” development that could help the companies create the technologies they need for the future.
The merger is not the only option being considered, with Honda recently testing the water over a partnership with General Motors before ultimately deciding to walk away. Foxconn, the Taiwan-based company that supplies Apple, has also approached Nissan about taking a stake.