Honda shares jump amid merger talks with Nissan

What’s new

A potential merger between Honda Motor and Nissan caught the attention of investors as Honda shares rose on Monday.

Why it matters

Japanese auto titans Honda and Nissan are working on a potential merger that would create the world’s third-largest automaker as the global industry races to adapt to the electric vehicle (EV) revolution.

The merger comes at a crucial time for Japanese automakers, which have struggled to keep up with global EV leaders such as Tesla and BYD. Honda and Nissan plan to leverage their combined scale to invest in the production of electric cars, shared components and advanced software for autonomous driving.

What to know

The companies announced Monday that they had signed a memorandum of understanding and that smaller Nissan alliance member Mitsubishi Motors Corp. had also agreed to participate in the negotiations on the integration of their companies.

The proposed deal aims to bring together operations under a common holding company, led by Honda, while preserving the distinct identities of each brand, according to Honda president Toshihiro Mibe. If completed, the merger will position the combined entity to better compete with market leaders Toyota and Volkswagen.

Market reaction and industry outlook

News of the merger sent shares in both companies soaring, with Honda shares up 3.8 percent and Nissan up 1.6 percent in Tokyo, reflecting optimism about the potential reshaping of the global auto landscape. In addition, analysts believe the deal could trigger further consolidation in the auto industry as companies seek to share costs and boost innovation.

The merger could be valued at over $50 billion based on the market capitalization of Honda, Nissan and Mitsubishi. Together, they would produce around 8 million vehicles annually – still behind Toyota’s 11.5 million, but ahead of most competitors.

What can the merger bring?

Analysts highlight potential benefits for both companies. Honda can access Nissan’s expertise in large SUVs, EV batteries and hybrid technologies. Conversely, Nissan would benefit from Honda’s operational efficiency and reputation for quality.

However, Nissan’s troubled recent history may pose challenges. The automaker has faced financial struggles, management upheaval and reputational damage following the arrest of former chairman Carlos Ghosn in 2018.

What people say

Honda president Toshihiro Mibe said: “We have come to the realization that for both parties to be leaders in this mobility transformation, it is necessary to make a bolder change than cooperation in specific areas.”

While acknowledging the challenges ahead, he added that there are “points that need to be studied and discussed. Frankly, the possibility of this not being implemented is not zero.”

Nissan CEO Makoto Uchida said: “We expect that if this integration becomes a reality, we will be able to deliver even greater value to a broader customer base.”

Cabinet Secretary Yoshimasa Hayashi said he would not comment on the details of the automakers’ plans at a routine briefing Monday, but he said Japanese companies must remain competitive in the fast-changing market.

“As the business environment surrounding the automotive industry changes substantially and competitiveness in storage batteries and software becomes increasingly important, we expect that measures will be taken that are necessary to survive international competition.” Hayashi said.

Meanwhile, speaking to reporters in Tokyo on Monday via video link, Ghosn called the planned merger a “desperate move.”

What happens next

While the details of the merger remain unclear, Mibe said they aim to have a formal merger agreement by June and to close the deal and list the holding company on the Tokyo Stock Exchange by August 2026.

This article includes reporting from the Associated Press.