Honda And Nissan Consider Merging To Stay Relevant In The Electric Vehicle Industry

The electric vehicle market has been growing thanks to consumer demand, government support, technological advancements and environmental concerns. These factors have created a perfect storm for EV manufacturers, with electric vehicles set to account for 20% of total global car sales.

Naturally, the EV revolution is being led by none other than Tesla, with up-and-coming Chinese EV firm BYD close behind in sales and market share. Yet, this has shaken up the traditional automakers who were unable to ride the wave of electric vehicle adoption.

Now, two Japanese auto giants, Honda Motor Co. and Nissan Motor Co., are reportedly in talks to merge to stay relevant in the rapidly evolving electric vehicle (EV) market. In fact, reports say that another Japanese carmaker, Mitsubishi, is also considering becoming part of the new automotive holding company.

So, can this potential merger help them combine resources and compete with industry leaders like Tesla and BYD? Will other global EV manufacturers strike similar partnerships?

Let’s explore!
 

What Are Honda And Nissan Planning?

 
Honda and Nissan, two of Japan’s largest businesses, are considering creating a joint holding company. Both automakers would put money into this new company and have a stake in running its operational activities.

The duo is also planning on bringing in Mitsubishi Motors, a key player in the Nissan-Renault-Mitsubishi alliance, to build a stronger automotive group. Since Nissan and Honda have previously collaborated on EV technology and software development, they view the merger as a natural extension of this existing partnership.

However, unlike Honda, Nissan is facing significant financial challenges and is reportedly in dire need of financial support. Its net earnings dropped by over 90% in mid-2024, prompting a drastic reduction in its annual operating profit forecast. Hence, the move to combine forces with Honda could not have come at a better time.

Although unconfirmed as yet a joint statement from the automotive companies stated, “As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.”

The move is reminiscent of mergers of Japanese electronics brands such as JVCKenwood and Konica Minolta consolidating to maintain industry competitiveness. Whether this move will be successful for the companies involved remains to be seen, as a key question about the potential merger is its timing.
 

Does The Nissan-Honda-Mitsubishi Merger Make Sense?

Despite 17 million electric vehicles being sold in 2024, the EV market’s growth has slowed worldwide. Yet, Chinese EV manufacturer BYD has taken this opportunity to gain significant ground in East and Southeast Asia, even outpacing its American, European and Japanese competitors.

In fact, BYD is significantly outpacing Tesla in overall EV sales with Tesla holding the lead in pure Battery Electric Vehicles (BEVs) alone. With this two-horse race, the EV industry is even more competitive than as Japanese automakers have lost regional markets like southeast Asia, China and Indonesia.

To make things worse, both Honda and Nissan are grappling with their electric transition. Honda is planning to launch its Honda Zero EV platform next year and its collaboration with General Motors on the Prologue SUV has shown some success. On the other hand, Nissan has struggled to capitalize on its early EV launch, the 2011 Leaf. Since then, Nissan has only delivered one new EV offering, the Ariya, which had a limited impact on the EV market.

Both Japanese automakers have focused on hybrid models till now but the joint holding company will give them the resources to build fully electric vehicles. Yet, the move will meet some hurdles before they can cooperate closely on EV technology to take on Tesla and Chinese rivals.

Firstly, aligning the two businesses cultures could be a big problem as Honda and Nissan have different ways of running their business.  Secondly, consolidating operations to streamline production, R&D and distribution will require significant effort and cooperation from both sides.

While this could make the merger challenging, it will give both automakers a chance to regain control in the EV market.
 

Conclusion

The possible merger of Nissan and Honda is seen by analysts as a smart move to deal with the serious threat that rival Toyota and EV leaders Tesla and BYD pose. With the trend around the world being inclined toward electric vehicles, now is the best time for Japanese automakers to take a risk and recapture their presence in the automotive industry.

The merger, if well-executed, could create a competitive powerhouse in the EV space. It could help accelerate EV development by pooling resources and expertise, expand their market reach in competitor-dominated regions and scale to offer more EV models. Although, analysts warn that a deal of this magnitude carries risks and complications that may go unnoticed.

Do you think that this possible merger will help Honda, Nissan and Mitsubishi get a bigger share of the global EV market?

Share your thoughts in the comments below!