Honda and Nissan are reportedly in talks for a potential merger to better compete with global electric vehicle (EV) leaders like Tesla and Chinese automakers such as BYD. The merger discussions were initiated due to the increasing competition in the EV market and Nissan’s financial struggles.
Honda’s market capitalisation of approximately USD$52 billion combined with Nissan’s of $54 billion would bring their combined valuation to around $106 billion. This would potentially also mean an estimated annual vehicle output of 7.4 million vehicles. This compares favourably to Toyota’s market capitalisation of $230.30 billion as of December 2024 with an annual vehicle production of 9.3 million vehicles.
The merger aims to pool resources and achieve greater economies of scale, while also allowing for more EV development, cost reduction, and to expand their global market presence.
Honda – a history
Founded in October 1946 by 本田 宗一郎・ほんだそういちろう (Soichiro Honda), Honda started as a small factory in Hamamatsu, Japan, initially producing bicycle engines. The company quickly expanded by developing its own engines and producing motorcycles.
As an aside, Honda got into trouble as he used to forge the 判子 of his parents so that he didn’t have to show them his report card. This worked well for a while, so that other kids heard about it and wanted Honda to forge their parents’ seals as well. Unfortunately, he got found out eventually as he didn’t account for the mirror-image effect that happens with stamps. This didn’t affect his name as it is the same no matter which way it was written, but the teachers noticed the strange names of the other students and he got caught.
Honda became a major player in the motorcycle industry with the introduction of the Super Cub in 1958, which became the best-selling motorcycle of all time. Honda entered the automobile market in 1963 with the T360 mini-truck and the S500 sports car. The company also made significant strides in motorsports, winning multiple Formula 1 championships.
Over the years, Honda has diversified its product line to include automobiles, motorcycles, power products, and even aircraft. The company has also focused on developing electric and alternative fuel vehicles, aiming to cut CO2 emissions by 50% by 2050.
Nissan – a history
Founded in 1933 by 橋本 増治郎・はしもと ますじろう (Masujiro Hashimoto) and DAT Motor Co. Ltd, Nissan’s roots trace back to the 快進社自働車工場 (often stylised as Kwaishinsha but eventually spelled as かいしんしゃじどうしゃこうじょう) established in 1911. In 1928, Nissan was officially established under the name 日本産業・にほんさんぎょう (Nihon Sangyo or Japan Industries) eventually becoming Nissan Motor (日産自動車・にっさんじどうしゃ).
Nissan became a major automaker with the introduction of the Datsun brand. Datsun was originally Datson, ie the son of DAT, but given the meaning of son in Japanese 損, which means loss or damage, it was changed to SUN.
The company expanded globally, establishing assembly plants in several countries. Nissan also entered the electric vehicle market, becoming the world’s largest EV manufacturer in 2018.
Nissan has undergone several transformations, including a partnership with Renault in 1999, forming the Renault-Nissan-Mitsubishi Alliance. The company has continued to innovate, focusing on electric and autonomous vehicles.
The Merger Announcement
There are several reasons why a merger is being considered, mainly competition with other large EV players, financial challenges and the opportunity to get more scale in the business. Both Honda and Nissan are facing stiff competition from Tesla, which has been leading the EV market.
Chinese automakers like BYD have also been rapidly gaining market share, putting pressure on traditional automakers.
Nissan has been struggling with financial difficulties, including a significant drop in profits and sales. Honda, while in a stronger financial position, is also facing challenges with its EV sales and cash flow.
By merging, Honda and Nissan aim to pool their resources, cut costs, and accelerate their shift to electrification, which could also include Mitsubishi as well.
Driving success?
This merger be one of the largest ever in the car industry, but what are the chances of success? If it goes through, it would create the world’s third-largest auto group by vehicle sales, with an annual output of around 8 million vehicles.
The success of this merger likely hinges on several factors which can be summarised as resource pooling, strategic alignment, and large amounts of government support.
By combining their resources, Honda and Nissan can accelerate their EV strategies and cut costs, and both companies have already started collaborating which will ease the integration process.
The Japanese government might support the merger to help these local automakers compete globally, and has a track record for doing so.
Of course, there will be a lot of scrutiny and the merger will face resistance in Japan due to concerns about job cuts and the impact on the economy.
Merging two large companies often brings challenges related to blending corporate cultures and management styles and to make maximum usage of such a merger often means a lot of redundancies. Picking the right staff moving forward is going to be a the factor which can determine success or failure, and of course it is notoriously difficult to make this work.
Overall, while the merger has the potential to create a stronger competitor in the global EV market, it will require careful navigation of these challenges to succeed.
