Honda, Nissan formally begin talks for possible $58B merger

On Monday, Japanese automakers Honda and Nissan signed a memorandum of understanding to officially start merger talks.

Driving the news: The proposed merger, announced last week, could create an automotive powerhouse worth $58B, including Mitsubishi, which, reportedly, is also open to the talks. 

Why now? Chinese automakers like BYD, Great Wall, and Nio are shaking up the market, offering affordable EVs that are cutting into the market share of many global brands in China and beyond. Especially for Japanese automakers, who have been on the slower side when it comes to shifting toward electrification.

Zooming out: For Nissan — this merger could be a lifeline.

• Nissan has struggled since the late 2018 arrest of former chairman Carlos Ghosn on charges of fraud and misuse of company assets — allegations he denies. Ghosn fled to Lebanon after being released on bail, leaving Nissan to rebuild amid the fallout.

• More recently, Nissan announced it would cut 9,000 jobs — 6% of its global workforce — and reduce global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen ($61 million). The company’s net earnings in mid-2024 fell by over 90% year-over-year.

• And as the auto industry gets more competitive, analysts say consolidation is a natural consequence.

But what’s in it for Honda?

• Beyond the models they’re selling — this deal could give Honda access to Nissan’s intellectual property, real estate, and fully operational manufacturing plants at a fraction of what it would cost to build them from scratch. 

• And although some argue that Nissan should be further along in the EV race — given its initial success with the Leaf — its platforms and technology could be useful to Honda.

• On top of that — it could eliminate a key competitor and likely come with financial support from the Japanese government.

What’s next? The two automakers will spend the next six months hashing out details for a merger under a holding company, targeting completion by August 2026.

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