No Merger for Honda and Nissan: A Risky Move?

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Honda Motor Co Ltd and Nissan Motor Corporation have decided to terminate their merger discussions. On February 6, Nissan President Makoto Uchida conveyed the decision to Honda President Toshihiro Mibe.

This is a regrettable turn of events. The two companies had been in talks about a potential merger due to their shared sense of urgency over the electric vehicle (EV) market. Emerging players such as Tesla in the United States and BYD in China are dominating the market now. Integration was supposed to be the key to overcoming this challenge.

Japanese automakers, including Honda and Nissan, are struggling in terms of EV price competitiveness and development speed. China's rapidly expanding EV market is forcing them to scale down their operations. Even in Southeast Asia, where Japanese manufacturers have traditionally held strong market shares, Chinese EV makers are beginning to gain ground.

Do the executives of both companies truly believe they can survive independently without a merger? If so, they must present a compelling strategy for competing in the global market.

Goals and Setbacks

In December 2024, Honda and Nissan announced they would enter full-fledged merger talks. Their plan was to sign a merger agreement in June 2025 and establish a holding company in August 2026, under which both firms would operate.

The goal of the merger was to expand their business scale and strengthen their technological capabilities. This would have included the development of next-generation technologies such as autonomous driving.

*(From left) Nissan CEO Makoto Uchida and Honda CEO Toshihiro Mibe (taken from the Honda official website).*

One major reason for the breakdown of negotiations was Nissan's delayed implementation of restructuring measures.

From the beginning, Honda made it a condition of the merger that Nissan complete its own restructuring. Honda urged Nissan to follow through on its rationalization plan, which was announced in November 2024. As part of this, Nissan would have had to cut approximately 9,000 jobs worldwide and reduce production capacity by 20%.

An Economy at Stake

However, due to slow progress and insufficient commitment, Honda proposed making Nissan a subsidiary and leading the restructuring efforts. This move provoked resistance from Nissan, deepening the divide between the two companies.

The domestic automobile industry is a critical pillar of Japan's economy, with a shipment value exceeding ¥50 trillion JPY (around $323.2 billion USD). Moreover, it employs approximately 5.5 million people in related industries. Any decline in this sector would significantly impact the entire Japanese economy.

While EVs remain expensive and infrastructure development for charging stations is lagging, demand growth is showing signs of slowing. For Japanese automakers, this could be seen as a temporary window of opportunity to revamp their strategies. The key question is how they will take advantage of this chance.