Honda Motor Company, Ltd. (NYSE:HMC) and Nissan Motor Co., Ltd. (OTC:NSANY) confirmed their merger plans at a joint press conference on Monday and said they aim for a completion date of August 2026.

If successful, the merger would create the world's third-largest automobile group based on global sales volume.

What To Know: The automakers plan to establish a new holding company, with Honda to appoint most of the board members and president of the new company.

"We have confirmed again that our business integration will bring about synergy in all areas and that the impact of this will be greater than expected," Honda President Toshihiro Mibe said, per the Japan News. "We aim to set a direction by the end of January," he added.

The companies are considering including Mitsubishi Motors (OTC:MMTOF) in the new consolidated company. Nissan is Mitsubishi's largest shareholder with a 24% stake in the company, and its president was present at Monday's joint press conference.

Why It Matters: Tokyo-based Honda could prove to be a lifeline for Nissan, which has struggled with declining vehicle sales in the U.S. and globally.

The automakers have already developed a partnership developing next-gen electric vehicle platforms.

The merger would also allow both companies to pool resources and reduce development costs in the face of increasing competition from Chinese automakers, including BYD, NIO, Inc. (NYSE:NIO) and Li Auto, Inc. (NASDAQ:LI).

"Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing," Honda Director and Representative Executive Officer Toshihiro Mibe said.

Nissan, based in Yokohama, Japan, has seen it sales in China drop, with 2023 sales reduced to nearly half of its 2019 sales volumes which counted for 1 in 3 of Nissan's global sales at the time.

"These Nissan-Honda merger discussions, coupled with the recent challenges at Stellantis and production cutbacks in Europe, all point to a single, stark reality: a new force has emerged in the automotive sector, and legacy automakers need to be acutely aware of the competitive threat," said Moody's Michael Brisson said referring to the Chinese automakers, per Yahoo Finance.

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