Nissan, Honda may initiate merger negotiations, considering Mitsubishi Motors' inclusion

According to reports from Japanese media, Nissan and Honda plan to initiate merger negotiations to establish a new holding company for their combined operations. This move aims to better compete against Tesla and other Chinese electric vehicle manufacturers.

A memorandum of understanding is expected to be signed soon. Additionally, the two companies are considering including Nissan's major shareholder, Mitsubishi Motors, in the new holding company.

Following this news, Nissan's stock surged nearly 24% in the Japanese market, hitting the daily limit for gains and marking its largest increase since at least 1974. Mitsubishi Motors' stock also rose by as much as 17%, reaching a new high since 2022. However, Honda's stock fell by 3.3%. Mitsushige Akino, president of Ichiyoshi Asset Management, noted that the merger could be perceived negatively for Honda, as the market might see the deal as a form of rescue.

Nonetheless, the discussions are still in the early stages and a formal agreement may not materialize. Both Honda and Nissan issued statements indicating that no merger plans have been announced, but, as stated in March, they are exploring various collaborative opportunities to leverage each other's strengths.

The report mentioned that the price wars in the electric vehicle market over the past year, led by Tesla and BYD, have put pressure on traditional automakers like Honda and Nissan, pushing them to seek ways to cut costs and accelerate vehicle development. A merger would be a significant step in that direction.

In fact, Nissan and Honda are the third and second largest automakers in Japan, respectively. In March, they announced a memorandum to explore strategic cooperation in areas such as electric vehicles. If they reach a merger agreement, it would be the largest deal in the automotive industry since 2021.