Japanese auto giants Honda and Nissan have begun talks about a potential merger that would create the world's third-largest car company worth $50 billion.
The heads of the two companies confirmed on Monday that they were working on a merger, confirming speculation that saw Nissan's shares rise more than 24% last week.
Smaller Mitsubishi Motors, of which Nissan is the largest shareholder, is also considering joining, the companies said at a joint news conference in Tokyo.
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“The rise of Chinese automakers and new players has brought great changes to the auto industry,” Honda Chief Executive Toshihiro Mibe said at a news conference.
“We have to build the capability to fight them by 2030, otherwise we will be defeated,” he said.
The two companies aim to achieve combined sales of 30 trillion yen ($191 billion) and operating profits of more than 3 trillion yen from the potential merger.
combine Mitsubishi Motors It will bring the Japanese group's global car sales to more than 8 million vehicles. Currently ranked third are South Korea's Hyundai and Kia.
They aim to complete negotiations around June 2025 and then set up a holding company by August 2026, when shares in both companies will be delisted.
Honda has a market capitalization of more than $40 billion, while Nissan has a market capitalization of about $10 billion.
Honda said it will appoint most members of the holding company's board of directors.
French automaker Renault, Nissan's largest shareholder, is open to a deal in principle and will study all implications of a tie-up, sources said.
Honda shares closed up 3.8% on the day, Nissan shares rose 1.6%, Mitsubishi Motors shares rose 5.3%, and the benchmark Nikkei stock index closed up 1.2% after news reports of details of the merger plan.
Impact on China
The merger of the two well-known Japanese brands highlights the threat that Chinese electric vehicle makers currently pose to some of the world's best-known automakers.
The move could provide the companies with opportunities for scale and shared resources in the face of fierce competition from more nimble Chinese rivals such as Tesla and BYD.
Like most other foreign automakers, Honda and Nissan are losing out in China, the world's largest car market, as competition intensifies from local automakers such as BYD, which make electric and hybrid vehicles packed with innovative software. car.
In November, Honda reported that second-quarter operating profit fell 15%, lower than expected due to lower sales in China.
At the same time, hard-hit Nissan announced plans to lay off 9,000 workers and cut global production capacity by 20%.
still, Experts warn The two automakers must deal with a number of challenges to make the merger successful. They warn that these companies need to pay special attention to integrating corporate culture.
Former Nissan Chairman Carlos Ghosn also said on Monday that he did not believe the Honda-Nissan alliance would succeed. The two automakers are not complementary, he said.
Ghosn is wanted in Japan for jumping bail and fleeing to Lebanon. His arrest for financial misconduct in 2018 plunged Nissan into crisis.
- Vishakha Saxena Additional Editor, Reuters
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