Honda and Nissan announce merger talks that will turn Japanese rivals into the third-largest automaker

Honda and Nissan have entered into talks for the Japanese former rivals to become the world’s third-largest carmaker by sales, amid intense competition from Chinese and other foreign rivals.

After weeks of speculation, the two companies announced Monday that they had signed a memorandum of understanding to form a joint holding company in what could be the largest domestic merger in Japan’s auto industry.

While limited details were available, the proposed deal appears to amount to an effective takeover of Nissan by Honda, with the latter appointing the potential company’s new president and the majority of board members. Mitsubishi, which has an existing partnership with Nissan, is also involved in the talks. The carmakers said they aim to finalize details by June with a view to listing as a new joint holding company in August 2026.

If the deal goes through, it will create the world’s third largest car group by car sales after Toyota and Volkswagen. Nissan and Honda will aim for combined sales of 30 trillion yen ($191 billion) and an operating profit of more than 3 trillion yen through the potential merger, they said in a statement.

Honda, Japan’s second-largest automaker after Toyota, has a market value of more than US$40 billion, while third-place Nissan is valued at around US$10 billion.

Former Nissan boss Carlos Ghosn – who saved the Japanese firm from near bankruptcy in the 2000s after he took over Nissan as part of an alliance with French carmaker Renault – said he could see no business logic in a partnership between the two Japanese rivals.

“There is no complementarity, the two companies are Japanese companies, they are strong in the same fields, they are weak in the same areas,” said Mr. Ghosn at an online press conference organized by the Foreign Correspondents’ Club of Japan. “To me it doesn’t make sense. Maybe they can find synergies in the future, but from an industrial point of view there is duplication everywhere.”

The 70-year-old was speaking from Lebanon, where he has lived in exile since 2019, when he staged a dramatic escape from Japan while on bail for alleged financial wrongdoing.

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He suggested that the motivation for the deal was political rather than business, based on a desire to keep Nissan in particular under Japanese control. Earlier this year, Taiwanese electronics giant Foxconn reportedly tried to buy Nissan as part of a plan to expand its fledgling electric car business, but was rebuffed. Nissan did not respond to a request for comment about Mr. Ghosn’s statements.

Despite changes to Japanese merger and acquisition guidelines in 2023 to make foreign takeovers easier, companies in Japan remain hostile to overseas ownership. Seven & i Holdings Co., which owns the 7-Eleven chain of convenience stores, has strongly opposed a takeover bid by Canada’s Alimentation Couche-Tard Inc.

Seven’s founding Ito family is reportedly preparing a bid of around 9 trillion yen ($58.7 billion) to take the company private rather than let it fall into foreign hands, although Couche-Tard says it remains committed to find a way forward.

With reports from Reuters