Nissan Motor shares surged 23.7% on Wednesday after a report emerged that the struggling Japanese automaker is considering merging with Honda Motor, potentially forming a larger entity to compete with larger rivals and invest more in the growing electric vehicle market. The news sent Honda shares falling 3%.
According to a report in the Nikkei newspaper, the two companies are considering operating under a holding company and plan to bring Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, under the new entity.
The potential merger comes as Nissan is facing financial difficulties, including posting downbeat results for its second quarter and announcing plans to slash 9,000 jobs and cut global production capacity by a fifth.
“This is a vital step for Nissan’s revitalization,” said Joe McCabe, president and CEO of AutoForecast Solutions. “They really didn’t have a leadership position in any one of the segments they competed in.”
The merger would create a combined entity with over 8 million vehicle sales annually, making it one of the world’s largest automakers, but still behind Toyota Motor and Volkswagen.
Vivek Vaidya, global client leader for mobility at research firm Frost & Sullivan, said the merger would allow the three companies to gain access to new technologies, reduce innovation risks, and create economies of scale.
The combined company would have expertise in traditional internal combustion engine vehicles, as well as hybrids, battery electric, and hydrogen vehicles.
In a statement, Nissan said the media reports about the merger were not based on an announcement from the company, and that it is considering various possibilities for future collaboration with Honda and Mitsubishi Motors, but no decisions have been made.