Japanese automakers Nissan Motor Co. and Honda Motor Co. confirmed ongoing discussions about potential collaboration on Wednesday but denied reports suggesting a merger decision.
Nissan shares surged over 22% in Tokyo following reports citing unnamed sources that the two companies might merge, forming the world's third-largest automotive group. Meanwhile, Honda's shares dipped nearly 3%. The reports also indicated that Mitsubishi Motors, a Nissan alliance partner, was part of the discussions.
The three automakers had previously announced plans in August to collaborate on electric vehicle (EV) components, such as batteries, and conduct joint research on autonomous driving software. Earlier in March, a preliminary agreement for cooperation between Honda, Japan's second-largest automaker, and Nissan, the third largest, was made public.
In response to the market reaction, Nissan and Honda released a joint statement clarifying that they are exploring "various possibilities for future collaboration" but have yet to make any final decisions.
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A merger, if realized, could create an automotive giant valued at approximately $55 billion, based on the combined market capitalization of Nissan, Honda, and Mitsubishi Motors. Such a move could strengthen their position to better compete with industry leaders Toyota Motor Corp. and Germany's Volkswagen AG.
Currently, Nissan is reevaluating its alliance with Renault SA while addressing financial challenges. The automaker recently announced plans to cut 9,000 jobs globally, equivalent to 6% of its workforce, and reduce production capacity by 20%. It reported a quarterly loss of 9.3 billion yen ($61 million).
Nissan CEO Makoto Uchida has emphasized the need for greater efficiency and adaptability to market trends. He recently took a 50% pay cut to accept responsibility for the company’s financial difficulties.
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Honda has also faced challenges, with profits declining nearly 20% in the first half of the fiscal year due to weaker sales in China. The rise of Chinese automakers and the industry's ongoing transition from fossil-fueled vehicles to EVs have created a challenging environment for Japanese automakers.
While a potential merger would increase their combined production capacity, Toyota, which produced 11.5 million vehicles in 2023, would remain Japan’s largest automaker. In comparison, Honda manufactured 4.2 million vehicles, Nissan 3.4 million, and Mitsubishi just over 1 million.