Honda, Nissan to Begin Merger Talks

What Happened?

The auto industry continues to adjust to changes in the economy. For that reason, auto giants like Honda Motor and Nissan Motor are considering a merger to compete in the new market.

The Japanese brands will begin entering into merger negotiations to join resources. It’s in an effort to remain competitive globally against larger electric vehicle makers, according to a report Tuesday.

The report adds that the two brands are also considering operating under a single holding company and are expected to sign a memorandum of understanding to form the newly merged entity.

But details surrounding the potential holding company's makeup are reportedly being discussed.

According to CNBC, Honda said in an emailed statement, 'The reported content was not released by our company.'

Honda continued by referring to an announcement earlier this year, 'Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths.'

The stock market reacted to the news, with Honda shares up 2% during Tuesday trading, and over-the-counter shares of Nissan jumped more than 11%.

Why it Matters

Pressure among legacy brands such as Honda and Nissan to perform and turn a profit in the marketplace has grown. This has happened amid the rise of EV production from Chinese automakers and U.S. all-electric maker Tesla (TSLA).

In 2019, the Japanese government reportedly encouraged Honda and Nissan to merge. That’s despite their current aim to create one of the world's largest auto groups since Fiat Chrysler joined France-based PSA Groupe to form Stellantis (STLA) in January 2021.

Many automakers in the industry took a big hit during the COVID-19 pandemic. It forced brands to turn their attention to implementing emergency measures.

Some car experts say that one of those big hits amid the pandemic for Nissan and Honda was the unwillingness of the brands' senior executives to share parts and platforms on engineering strategies.

Like Nissan and Honda, Stellantis also looks to make key changes to avert an 'auto sector crisis' following the resignation of its former CEO.

How it Affects You

It doesn’t matter about the origin of these auto companies. German, U.S., and European automakers are experiencing a decline in production and sales growth. This is forcing them to adapt.

Tariffs will also be a big item to watch. President-elect Donald Trump plans to implement significant changes in the cost of imports which will impact consumers and investors alike.