Why Are Honda And Nissan Reportedly Eyeing A Megamerger?

The turmoil in the automobile sector, especially in light of the current EV upheaval, could soon produce a stunning merger. According to Nikkei Asia, Honda and Nissan are exploring a merger option to stay competitive in the face of the onslaught from Chinese electric carmakers and Tesla. "Honda and Nissan are considering operating under a holding company, and soon will sign a memorandum of understanding," says the report.

Interestingly, Mitsubishi could join the nexus as the third player, in hopes of creating an automobile conglomerate with bigger aspirations in the global market. Discussions between Honda and Nissan reportedly began in March this year, and a few months later, the two parties inked a deal covering the automotive software stack and more importantly, "shared automotive components." The blockbuster deal between the Japanese automakers won't be one-of-a-kind though.

Earlier this year, Hyundai and General Motors also signed a memorandum of understanding, with the goal of collaborating on electric and hydrogen tech for automobiles, with a focus on co-developing passenger and commercial vehicles. In the same month, BMW and Toyota also joined hands to develop advanced fuel cells for electric cars, with the overarching goal of reducing costs and developing the tech stack.

Two months later, Rivian and Volkswagen announced their partnership, with the latter set to pour billions of dollars into the EV upstart. Nissan and Honda are likely hoping for similar end goals, but it seems the deal has more to do with fixing their own market situation and staying competitive rather than taking a lead.

Back in 2023, Honda confirmed plans to launch a new mid- to large-sized EV in the US market by 2025, accelerating the deployment of its e:Architecture platform, alongside a promise of new home-based charging solutions based on the SmartCharge system. Earlier today, Honda confirmed that the Prelude is returning to the U.S. market next year as a hybrid coupe.

Honda has reportedly cut its global output by half a million units, and it is now focused on hybrids as the more resilient stopgap measure ahead of its planned electrification, which is still over a decade ahead. Things are not going to ease anytime soon for either party, as Reuters reports that the upcoming Trump administration aims to reduce EV support and impose tariffs, which could very well send shockwaves through the supply chain.

Nissan, on the other hand, is reportedly staring at an ouster from the car business. The company has seen its sales dwindle in the U.S. as well as its home market while witnessing a sharp 85% drop in quarterly profits, and it has trimmed production ahead of a planned restructuring. To make matters worse, a key shareholder in Renault is apparently looking at an exit from its Nissan stake.

There were even rumors afloat that Honda could very well save the day for Nissan, as both companies are already collaborating on EV and software development fronts. Nissan has tried to shake things up with the 2024 Ariya, but it isn't quite the competitive win as was the case with the Leaf series, which itself is staring at a price bump with its next refresh.