The Japanese companies Nissan and Honda have taken their first steps towards merging and forming a new force in the global automobile industry at a time when the industry is witnessing radical changes in its transition away from fossil fuels and its transition to electric energy.
The two companies recently said they are in talks to merge by 2026, which represents a historic shift for the Japanese auto industry, and underscores the threat that Chinese electric car makers now pose to the world’s long-dominant traditional automakers.
This alliance would lead to the creation of the third largest automobile group in the world in terms of vehicle sales after Toyota and Volkswagen, according to Reuters.
It also gives the two companies the opportunity to share resources in the face of intense competition from Chinese and American automakers.
Automakers in Japan have lagged behind their major competitors in the field of electric cars, and are trying to reduce costs and make up for lost time in light of new companies such as the Chinese “BYD” and Tesla in the electric car market devouring a large share of the market.
For his part, Honda President Toshihiro Mebe said that Honda and Nissan will try to unify their operations under a joint holding company, and Honda will lead the new management, while maintaining the principles and brands of each company.
He added that they aim to conclude a formal merger agreement by next June, and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026.
6 reasons behind the merger
The NPR platform and the Indian Express platform identified several reasons and factors behind this merger, the most important of which are:
- Economies of scale
The merger forms the third-largest automaker group globally in terms of number of vehicles sold, enhancing its ability to compete with Toyota and Volkswagen globally, and its dominance domestically in Japan.
- Chinese competitor
Chinese companies, such as BYD and Nio, dominate the local and global market for electric cars, which has prompted Honda and Nissan to face losses in their market share in China and Europe, as China is now the largest exporter of cars globally.
- Poor performance of Honda and Nissan in electric cars
While Tesla and Hyundai shine in electric cars, Honda and Nissan suffer because they are late in the electric transition, despite Honda’s success in hybrid cars.
The merger seeks to reduce costs by sharing manufacturing and development platforms for electric and hybrid vehicles, and consolidating research and development centers.
- Nissan’s financial crisis
Nissan is suffering from major financial losses and a turmoil in its relationship with Renault, which has prompted it to reduce jobs and production to enhance its competitiveness.
- Integration between markets and technologies
The merger aims to integrate, as Nissan has a strong presence in Europe, while Honda excels in gasoline engines. Cooperation in electric cars could return Nissan to the forefront and support Honda in this sector.
Honda and Nissan… between history and current reality
Honda was founded in 1948 in Hamamatsu, Japan, by Soichiro Honda, who began developing engines for military generators and converting them into motorcycles. Honda quickly became the world’s largest motorcycle manufacturer since 1959, with production exceeding 400 million units by 2019.
Honda is also one of the world’s largest manufacturers of internal combustion engines, producing more than 14 million engines annually. In 2023, it ranked eighth globally in the automotive industry.
- Market value: $44.87 billion.
- Assets: $196.7 billion.
- Revenue: $141.3 billion.
- Profits: $7.7 billion.
Nissan produced its first car in 1914 under the name Datsun, but its current name did not appear until 1933. The company expanded significantly in the 1970s, when it became the largest supplier of cars to the United States.
However, Nissan experienced financial problems by the late 1990s, which prompted it to enter into a partnership with French manufacturer Renault in 1999.
Currently, Nissan is suffering from financial crises. In 2024, it announced the reduction of 9,000 jobs and a reduction of global production by 20% to save $3 billion. Its stake in Mitsubishi also decreased, and executive management agreed to reductions in its salaries.
- Market value: $11.79 billion.
- Assets: $131.2 billion.
- Revenue: $87.7 billion.
- Profits: $3 billion.
Challenges and competition
The merger of Honda and Nissan aims to confront fierce competition from automobile giants such as Toyota of Japan, BYD of China, and Tesla of America.
Below is a brief look at competitors according to Forbes magazine numbers, and based on evaluations determined when writing this report.
- Market value: $262.8 billion.
- Assets: $595.4 billion.
- Revenue: $311.9 billion.
- Profits: $34.2 billion.
- Market value: $1.23 trillion.
- Assets: $109.2 billion.
- Revenue: $94.7 billion.
- Profits: $13.7 billion.
- Market value: $103.44 billion.
- Assets: $93.8 billion.
- Revenue: $83.2 billion.
- Profits: $4.2 billion.
The merger of Honda and Nissan strengthens their position in the electric and hybrid car market, while exploiting the integration of expertise to reduce costs and improve their global competitive capabilities.
The 10 largest automakers in the world by market value
The following is a list of the 10 largest automakers in the world in terms of their market capitalization at the time of writing, according to the “Companies Market Cap” platform.
- Tesla: $1.23 trillion
- Toyota: $262.85 billion
- Xiaomi: $111.49 billion
- BYD: $103.44 billion
- Ferrari: $75.86 billion
- General Motors: $57.38 billion
- Porsche: $54.67 billion
- Mercedes-Benz: $52.48 billion
- BMW: $49.78 billion
- Volkswagen: $46.02 billion
