Nissan and Honda have confirmed they have entered into merger talks

Honda, Nissan, and Mitsubishi have announced they are in discussions over a potential three-way merger, aiming to create the world’s third-largest car manufacturer with annual sales of £46 billion. The move comes as the Japanese automakers face declining sales and intensifying competition from Chinese brands.

On Monday, the companies confirmed that Honda and Nissan had agreed to explore a business integration through the formation of a joint holding company. Mitsubishi is expected to decide whether to join the merger by the end of January.

This merger would unite Japan’s second- and third-largest carmakers, alongside the smaller Mitsubishi, as they confront significant shifts in the automotive industry. If successful, the new entity would rank behind only Toyota and Volkswagen in terms of global sales.

While Toyota has maintained financial strength due to its early adoption of hybrid technology, other Japanese carmakers are struggling to secure the funds necessary to transition from traditional petrol and diesel engines to electric vehicles. Hybrid models remain a more affordable manufacturing option, but Chinese automakers like BYD and SAIC have aggressively focused on electric cars, capturing an increasing share of the global market.

Reports suggest that China’s Foxconn, known for manufacturing iPhones for Apple, had considered an acquisition of Honda or Nissan, which accelerated merger discussions among the Japanese firms.

Honda’s market value stands at 6.74 trillion yen (£34 billion), significantly higher than Nissan’s 1.67 trillion yen and Mitsubishi’s 717 billion yen. In 2023, Honda sold 3.8 million vehicles, outpacing Nissan’s 3 million and Mitsubishi’s 700,000, despite Honda’s greater efficiency.

Nissan has been in turmoil for years, grappling with declining profits and the fallout from the 2018 arrest of its former CEO, Carlos Ghosn. Ghosn later fled Japan, evading house arrest by hiding in a musical instrument case with assistance from former special forces operatives. Now residing in Lebanon, Ghosn has criticized the proposed merger as impractical. Speaking to Reuters, he argued that Honda and Nissan are too similar for the merger to generate significant benefits.

“From an industrial perspective, there is duplication everywhere,” Ghosn said. He previously led a partnership between Nissan, Renault, and Mitsubishi, aiming for global scale, but remains skeptical of the current plans.