Honda and Nissan are in talks to merge in a move aimed at boosting their competitive edge against global electric vehicle manufacturers like BYD and Li Auto

Honda and Nissan have entered negotiations regarding a potential merger to strengthen their position in the global automotive market, particularly in the face of growing competition from larger electric vehicle (EV) manufacturers. According to reports from the Nikkei financial newspaper, these talks are driven by the need for the Japanese carmakers to counter the rapid rise of Chinese EV giants like BYD and Li Auto.

In 2023, the two companies collectively sold 7.4 million vehicles, but are now facing mounting pressure as Chinese automakers continue to gain market share at an accelerated pace. This collaboration could allow Honda and Nissan to better compete in the expanding EV market, where new players are challenging traditional auto manufacturers.

Nissan’s stock rose more than 20% following the announcement of the merger discussions. A spokesperson for Honda confirmed that a potential merger is one of the options being considered, stating, “We are discussing possibilities for cooperation between Honda and Nissan in the future, and those possibilities include the latest reports, but there is nothing decided.”

The two companies have already been strengthening their partnership, particularly in the EV space, where they have been working together to develop new technology. In March, Nissan’s CEO, Makoto Uchida, emphasized the need for automotive manufacturers to adopt new strategies, saying, “Emerging players are very aggressive and are making inroads at incredible speed. We cannot win the competition as long as we stick to conventional wisdom.”

The talks are said to focus on creating a single holding company under which both brands and possibly Mitsubishi Motors (in which Nissan holds a 24% stake) would operate. This deal, if finalized, could be one of the largest in the automotive sector since the $52 billion merger of Fiat Chrysler and PSA in 2021, which resulted in the formation of Stellantis.

Amid a challenging environment for automakers, including falling profits and the costly transition to electric vehicle production, Honda and Nissan’s potential merger would create a formidable entity in the global automotive landscape.