According to a report by Nikkei on Tuesday, Japanese Auto Manufacturer Nissan and Honda Motor plan to negotiate the merger to better respond to the rapidly changing Global Auto Industry.

The report indicates that Honda and Nissan are considering establishing a holding company for Operation and will soon sign a memorandum of understanding (MoU). In addition, the two companies also plan to eventually include Mitsubishi Motors under the holding company, while Nissan is currently the largest Shareholder of Mitsubishi Motors, holding 24% of the shares.

Both Nissan and Honda have stated that the reports regarding the merger have not been announced by either of the companies. Both companies stated in email statements that

"The content of the related reports was not published by our company. As announced in March of this year, Honda and Nissan are exploring various possibilities for future cooperation to fully leverage each other's strengths. We will inform stakeholders at the appropriate time if there are further updates."

After the news broke, Honda's stock rose about 2% at its peak, while Nissan'sOTCstock price peaked at over 11%.

If this merger is successfully accomplished, it will become the largest merger in the Global Auto Industry since the formation of Stellantis by the merger of Fiat Chrysler and France's PSA Groupe in January 2021.

Analysis suggests that if Honda and Nissan successfully merge, it will create an automotive giant that can compete with Toyota, essentially consolidating the Japanese auto industry into two major camps and providing Honda and Nissan with more resources to compete with larger rivals in the Global market. In the first half of this year, Honda, Nissan, and Mitsubishi together sold about 4 million vehicles globally, far below the 5.2 million vehicles sold by Toyota alone.

In August of this year, Nissan and Honda reached a strategic cooperation agreement to share Auto Parts and Software. At that time, Honda CEO Toshihiro Mibe proposed the possibility of capital cooperation with Nissan.

Previously, automotive industry consultants and other experts have called for a more collaborative approach throughmergers and acquisitions.cost-sharing to better respond to the rapid expansion of Chinese Auto Manufacturers and the competition from the USA electric vehicle leader Tesla.

As the second and third largest Auto Manufacturers in Japan, Honda and Nissan are seeing their market share decline in China. In November, the Chinese market accounted for nearly 70% of global electric vehicle sales, with purchases of over 1.27 million electric vehicles that month. In 2023, Honda and Nissan's total global sales reached 7.4 million vehicles, but they are facing challenges from electric vehicle manufacturers, especially in the Chinese market, where companies like BYD have taken a substantial lead.

Currently, Nissan is accelerating its restructuring efforts to cope with the pressures of stagnant revenue growth and declining profits. Last month, Nissan reported that its net income for the first half of the fiscal year had plummeted by more than 90% year-on-year, and it has lowered its full-year operating profit forecast by approximately 70%. The company is facing pressure from aggressive Shareholders, as well as a concerning debt burden, leading to speculation in the credit market about its investment-grade rating. Additionally, Nissan has partially dissolved its complex strategic partnership with French Renault SA that lasted for 25 years.

Furthermore, the Financial Times reported last month that Nissan is seeking a major investor to replace part of Renault's equity Hold, and has not ruled out the possibility of Honda acquiring some of its shares. Meanwhile, Honda is adjusting its Global Strategy, accelerating the development of hybrid vehicles while increasing investment to enhance the production capacity of pure electric vehicles.

It is not only Japanese car manufacturers that face difficulties; Other traditional car companies are also currently in trouble. General Motors and Ford Motor have also slowed their investment in electric vehicles, due to high borrowing costs and insufficient charging infrastructure hindering the popularization of electric cars, despite government incentives being offered. In Europe, Volkswagen is engaged in difficult cost-cutting negotiations with unions, as declining demand and rising costs have created immense pressure.