Honda-Nissan Merger Moves Too Slow For Comfort

Slow going. Speed limits are usually intended to prevent drivers from going too fast. Occasionally, though, they warn against bumbling along the road too slowly. Honda Motor boss Toshihiro Mibe and his Nissan Motor counterpart Makoto Uchida will need reminding of this if they don’t soon shift out of low gear for the tie-up they proposed on Monday.

Japan’s second- and third-largest carmakers after Toyota Motor are planning to spend the next six months discussing how to combine forces. The pair, which have a combined market value of roughly $50 billion, have been suffering from falling sales, not least in China. Nissan’s problems are particularly acute, forcing Uchida to start an emergency overhaul last month.

If they agree to proceed with a deal they’ll create a holding company to house the two brands, float it on the Tokyo Stock Exchange in August 2026 and then delist both manufacturers’ shares. Smaller rival Mitsubishi Motors, which is 34%-owned by Nissan, will decide by the end of next month whether to join the negotiations.

There are reasons not to go speeding into a corporate marriage. Stellantis’ recent woes stem in part from recently departed CEO Carlos Tavares’ penchant for welding different automakers together in relatively short order. And Honda boss Mibe, who also unveiled an up to $7 billion share buyback the same day, is understandably wary of buying his $10 billion rival if its woes have not yet reached a nadir.

But that’s too much caution. Mibe is so keen to prove the merger is not a rescue that any deal depends on a Nissan turnaround. Specifically, the smaller peer’s expected operating profit of 150 billion yen in the year to the end of March has to roughly triple by mid-2026, according to a presentation given at Monday’s press conference. Analysts currently reckon it’ll fall far short, growing by just 50%, per LSEG data.

Uchida has to do so while trying to manoeuvre around a couple of major obstacles facing the industry. First, Western and Japanese carmakers are increasingly losing ground in the world’s largest car market, China, to domestic rivals. Nissan’s sales in the People’s Republic have halved in recent years.

Second, U.S. President-elect Donald Trump is threatening to impose tariffs on vehicle imports, which would dent already bashed-up earnings.

Granted, mergers do not solve all problems. But the efficiencies they can create – some $6.4 billion of synergies, Nissan and Honda reckon – can certainly help. A sense of urgency is in order.

Context News

Honda Motor and Nissan Motor on Dec. 23 said they have signed a memorandum of understanding to spend six months discussing a potential business integration. If the two carmakers agree to proceed around June 2025, they would first set up a holding company to be listed on the Tokyo Stock Exchange by August 2026, at which point both companies’ shares would be delisted. Mitsubishi Motors, which is 34%-owned by Nissan, will decide by the end of January 2025 whether to join the discussions.