Rumors of a merger between Japan's automotive giants resurface!

According to Nikkei News, Honda Motor Co(referred to as "Honda") and Nissan Motor Co(referred to as "Nissan") have entered negotiations for a possible merger to better address the rapidly changing global automotive industry landscapeInsiders have revealed that both Honda and Nissan are considering the formation of a holding company and are expected to sign a memorandum of understanding in the near futureDetails on the ownership stakes for each company in the new enterprise, along with other relevant specifics, will be determined later.

Following the announcement, the stock prices of Nissan and Mitsubishi surged; as of press time, Nissan's shares increased by 23.7%, hitting a trading limit, while Mitsubishi's shares rose over 19%. In contrast, Honda's shares dropped by more than 3%.

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Nikkei News has also reported that Honda and Nissan intend to incorporate Mitsubishi into this holding company framework

Currently, Nissan is the largest shareholder of Mitsubishi, owning 24% of its shares.

If the merger between Nissan, Honda, and Mitsubishi is realized, the new entity would have annual vehicle sales exceeding 8 million unitsThis would position the company among the largest car manufacturers globally, yet still below Japan's other automotive titan, Toyota (which recorded sales of 11.2 million units in 2023), and Volkswagen of Germany, which sold 9.2 million units the previous year.

In response to the reports, Honda has stated that this information did not originate from themThe company emphasized that, as announced in March and August of this year, Honda, Nissan, and Mitsubishi are exploring various potential cooperation avenues based on each company's strengths

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As of now, no decisions have been finalized regarding the media speculationUpdates will be communicated to stakeholders at a suitable time when necessary.

Mitsubishi has indicated that the reports about a possible merger between Nissan and Honda aren't based on any formal announcements from the company.

The signs of a merger have been apparent for some timeHonda's Executive Vice President, Shinji Aoyama, had previously disclosed that the company was indeed considering various options, including a potential merger with NissanHe mentioned that the parties were indeed contemplating the establishment of a holding company to facilitate operations

This move intends to consolidate resources and enhance competitiveness against other automotive firms in the fiercely contested market.

In March 2024, Honda and Nissan announced their cooperation in electric vehicle battery development and software, planning to jointly explore next-generation software-defined vehicle platforms while sharing resources like motors and inverters to co-develop new batteries and electric axesIn August, Honda, Nissan, and Mitsubishi signed a memorandum of understanding to explore cooperation potential in areas such as vehicle electrification and software development.

Should this merger be successful, it would mark the largest acquisition in the automotive sector since the merger of Fiat Chrysler and the French Peugeot Citroën Group in January 2021 to create Stellantis.

Surge in Stock Prices for Nissan and Mitsubishi

After the news broke, both Nissan and Mitsubishi saw their stock prices soar; by press time, Nissan shares rose 23.7%, reaching the upper trading limit, while Mitsubishi shares increased more than 19%. In stark contrast, Honda saw a decline of over 3%.

Public records show that Honda, Nissan, and Mitsubishi are all leading automakers in Japan

Honda has been in operation since its founding in 1948, spanning various sectors such as automobiles and motorcyclesNissan was established in 1933, while Mitsubishi Motors became independent from Mitsubishi Heavy Industries in 1970, emerging as a core member of the Mitsubishi GroupFor the fiscal year 2023 (April 2022 to March 2023), Honda had global sales of approximately 3.98 million unitsNissan's global sales for fiscal year 2023 stood at 3.37 million units, while Mitsubishi recorded sales of 780,000 units.

However, the Japanese automotive brands have faced significant challenges in the Chinese marketFrom January to November 2024, cumulative sales in China showed a decrease of 30.7% for Honda and 10.5% for Nissan.

Both companies have also experienced poor stock performance