Japanese automakers Honda and Nissan, ranked 7th and 8th globally in vehicle production, are reportedly pursuing a merger, according to Nikkei and NHK on the 18th.

If successful, the merger would propel the combined company ahead of Hyundai Motor Group to become the third-largest automaker in the world by sales volume. The move is seen as an effort by Japanese automakers to strengthen their position as the industry rapidly transitions toward electric vehicles (EVs) and software-driven technologies, areas where U.S. companies like Tesla and Chinese firms such as BYD are taking the lead.

■ Holding Company to Oversee Both Firms
Nikkei reported that Honda and Nissan are in talks to integrate their operations under a holding company structure. Both firms would fall under the umbrella of this new holding company, with details such as the integration ratio to be finalized following a memorandum of understanding (MOU).

Nissan, which holds a 24% stake in Mitsubishi Motors, is also expected to involve Mitsubishi in the merger. Honda sold 3.98 million vehicles globally last year, ranking 7th, while Nissan sold 3.37 million, ranking 8th. Combined, their sales would total 7.35 million vehicles, surpassing Hyundai Motor Group's 7.3 million and placing them third in global rankings. With Mitsubishi's additional 780,000 vehicles, the combined total would exceed 8 million.

■ Leaders Acknowledge Possibilities, but No Final Decision Yet
Speaking to reporters, Honda President Toshihiro Mibe stated, “We are exploring various forms of collaboration and other possibilities. However, nothing has been decided or officially announced.” Similarly, Honda, Nissan, and Mitsubishi all issued statements saying, “No final decisions have been made at this time.”

■ Industry Transformation Driving Consolidation
The merger discussions come as the auto industry undergoes a once-in-a-century transformation, shifting from internal combustion engines to electric vehicles. The International Energy Agency (IEA) estimates that over 50% of new car sales globally will be electric by 2035.

Amid this shift, Japan’s automakers have fallen behind competitors like Tesla and BYD in EV and software development. Nissan, in particular, has struggled in China due to strong competition from domestic brands and has faced declining sales in the U.S. due to its slower rollout of hybrid models.

Nissan recently announced restructuring plans to cut 20% of its global production capacity and lay off 9,000 employees. Nikkei suggests that Nissan views strengthening ties with Honda as essential for its recovery.

■ Benefits for Both Parties
Experts believe the merger could offer immediate financial relief for Nissan and allow Honda to scale up and invest more in advanced technologies. Since March, the two companies have been exploring collaboration, signing a comprehensive partnership agreement in August to co-develop vehicle software and share components.

A merger would enable both firms to secure the massive investment required for autonomous driving software and EV battery development, enhancing their ability to compete with Tesla and Chinese EV makers.

■ Role of Foxconn in Accelerating Talks
According to Bloomberg and Nikkei, Taiwanese electronics giant Foxconn, a key supplier for Apple, recently sought to acquire a stake in Nissan to participate in its management. However, both Nissan and Honda reportedly resisted Foxconn’s involvement, with Honda wary of Foxconn’s growing influence. Analysts believe Foxconn’s overtures may have hastened Honda and Nissan’s decision to pursue a merger.

By joining forces, Honda and Nissan aim to secure a stronger position in the rapidly evolving global auto market and better compete with industry leaders in the EV and software-driven future.