Honda, Nissan talk possible merger to create world’s third-largest auto company

Executive Vice President Shinji Aoyama said Honda is considering several options including a merger, capital tie-up or the establishment of a holding company after a report in Nikkei newspaper of the two carmakers holding talks.

Mitsubishi Motors, in which Nissan is the top shareholder with a 24 per cent stake, is also likely to be brought under the holding company. Shares of Mitsubishi were up 19.65 per cent to 487.2 yen.

Honda-Nissan merger talks

A combined Honda and Nissan would create a $54 billion company with an annual output of 7.4 million vehicles, making it the world’s third-largest auto group by vehicle sales after Toyota and Volkswagen.

Earlier this year in March, the two companies made a decision to work together on electric vehicle batteries and software. Honda Chief Executive Officer Toshihiro Mibe had floated the possibility of a capital tie-up with Nissan at that time in a joint press conference.

A merger would not only create a singular rival to Toyota Motor in Japan, but would also help them face the global competition in EVs from companies like Tesla and Chinese manufacturers.

It’s reported that the companies are expected to make an announcement on December 23.

Nissan has been plagued by a deepening financial crisis in recent months. It announced cutting 9,000 jobs and 20 per cent of its global production capacity last month to save $2.6 billion in cost.

French automaker Renault, which is a major Nissan shareholder, told Reuters it had no information and declined to comment. The company’s shares jumped 6.5 per cent on the news.

Meanwhile, Bloomberg reported that Foxconn, the Taiwan-based manufacturer of iPhones and other electric products, is said to have approached Nissan to take a controlling stake. The company has been investing heavily in factories to build electric vehicles.