On December 23, 2023, Honda Motor Coand Nissan Motor Cojointly revealed in a press conference held in Tokyo that they signed a memorandum of understanding, marking the official commencement of merger negotiationsThe two Japanese automotive giants plan to establish a holding company funded collaboratively, with both Honda and Nissan operating as subsidiaries under this new entityThis potential merger reflects the necessity for these companies to innovate and remain competitive in the rapidly evolving automotive landscape characterized by electric mobility and advanced technologies.

During the joint announcement, Honda President Toshihiro Mibe and Nissan President Makoto Uchida expressed their aspiration for the merged entity to emerge as a “world-class mobility company,” boasting annual revenues exceeding 30 trillion yen (approximately 139 trillion yuan) and operating profits surpassing 3 trillion yen (about 139 billion yuan). This ambitious goal signifies an intention not just to survive the current economic challenges but to thrive by leveraging collective strengths and resources.

As part of the overarching timeline, the final agreement of the merger is anticipated to be reached by June 2025. Should the integration be successful, both manufacturers expect to delist from stock exchanges and transition into the newly formed holding company by August 2025. Notably, reports from Kyodo News suggest that the CEO of the merged company will be selected from Honda’s board, implying that Honda will play a dominant role in this new structure.

Moreover, the announcement hinted at Mitsubishi Motors potentially signing a memorandum of understanding to explore involvement in the business consolidation

Mitsubishi is expected to make a final decision by the end of January 2025, currently holding 24% ownership of NissanThis could indicate a larger strategic alliance in which Mitsubishi could carve a niche in the highly competitive automotive industry.

Should Honda and Nissan succeed in their merger, the new holding company would position itself as the third-largest automotive group globally, following industry titans Toyota and VolkswagenHowever, both companies have faced declining sales in recent years, particularly due to insufficient efforts in transitioning to electric vehicles, which have become a focal point for the automotive sector worldwideIn fiscal 2023, Honda reported sales of 3.98 million vehicles, while Nissan’s figures totaled 3.44 million—both down approximately 1.5 million vehicles from 2019.

Specifically in the Chinese market, one of the largest auto markets globally, both manufacturers continue to see negative sales trends

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In the first eleven months of this year, Honda’s sales in China plummeted by 30.7% to 740,000 units, while Nissan saw a decrease of 10.5%, totaling 620,000 units soldThis indicates that both companies face significant challenges in maintaining market share and adapting to local consumer preferences, which increasingly favor electric and innovative vehicle options.

Additionally, as advancements in vehicle electrification and autonomous driving technologies advance, the development of in-car software has garnered substantial importanceThis has led Japanese automotive manufacturers to consider mergers and other cooperative strategies to share the heavy financial burdens associated with research and development, thereby enhancing their competitive edge in a tech-driven market landscape.

However, skepticism looms among industry experts and former executives regarding the merger

Carlos Ghosn, Nissan’s former CEO, has publicly expressed his doubts, labeling the proposed merger as a "desperate move" that lacks pragmatic substanceHe articulated the challenges faced due to minimal synergistic benefits between Honda and Nissan, suggesting that both companies operate within similar markets and produce comparable products, thus complicating any potential integration.

Ghosn further elaborated by contrasting the inherent strengths of both organizations, stating, “Honda is a remarkable engineering organization, extremely proficient in engineeringNissan prides itself on its engineering capabilities as well.” Thus, the dispute may ultimately revolve around decisions regarding which technological direction or innovations the new company will adopt, posing additional complexities in the merger.

Industry analysts also share similar concernsCui Dongshu, secretary-general of the China Passenger Car Association, commented that he remains skeptical about the merger, indicating that both Honda and Nissan must enhance their local R&D investments in China and harness the advantages of the local industrial chain to foster product innovation that empowers global growth

His insights reflect broader worries about stagnation in the energy technology sphere, necessitating faster innovation cycles to keep pace with industry transitions toward electrification and SUV development.

Moreover, a global partner at an international consulting firm offered an anonymous viewpoint to a Chinese news outlet, weighing in on the inherent risks associated with the mergerHe highlighted the equivalency in scale between Honda and Nissan, questioning which entity would take precedence in decision-making and how they would balance resources effectively to nurture both brandsThis underscores the imperative to ensure operational coherence while maintaining distinctive brand identities, a challenge that remains critical in the hierarchies of the automotive industry.

Lastly, the consulting partner forecasted that while there might be opportunities for Honda and Nissan to expedite advancements in electrification, achieving breakthroughs in intelligent driving and connectivity could prove significantly challenging