Honda Nissan merger news update — Official talks begin ahead of MoU signing

Following our earlier report on the commencement of merger talks between Honda and Nissan, the companies have officially confirmed the same in a joint press conference held on December 23, 2024. Here are the important updates surrounding the Honda Nissan merger news, also covering Mitsubishi’s prospects.

Honda Nissan merger talks 

Last week, we had reported that Honda Motor Company and Nissan Motor Corporation, two of Japan’s biggest automakers, had entered into talks discussing a prospective merger. Both companies had not confirmed the same at the time, but they have just held a joint press conference to address the matter. 

Reason for Honda Nissan merger talks

The key reason behind this move by these global automakers is the increased competition that they are facing from rising electric vehicle players in the global markets such as BYD from China and Tesla from the States. This has pushed them to take such a step in order to ensure survival.  

Nissan’s representative said during the press conference, "The business environment continues to change significantly, and faster than expected. In these circumstances, any company, irrespective of its size that sticks to preconceived ideas and is late in making (a) decision or is afraid of a change will not be able to unlock the future." The representatives also emphasised on the belief that mobility will be driven by vehicle intelligence and electrification rather than hardware. 

Honda Nissan MoU 

Representatives of both companies have announced that they have signed a Memorandum of Understanding (MoU) after a board resolution at the respective companies, in order to begin discussions and negotiations around a merger. While this does not mean that the merger is certain to happen, it does give us an idea of what could happen in the near future.

Mitsubishi’s participation

A representative from Mitsubishi Motors said that the company had also signed the three-party MoU to begin discussion on its contingent involvement in this potential merger. He cited that Mitsubishi shall confirm its participation by the end of January 2025. A little later into the conference, the representative said that Mitsubishi aims to provide its expertise in ASEAN operations and technologies, and vehicles like compact pickup trucks, in this partnership, if it comes into existence.

On a side note, Mitsubishi bought back 10.02% of the company's total issued shares (excluding treasury shares) from Nissan, reducing the latter's 34.07% stake to 24.05%. Mitsubishi cited the recent trend to reduce cross-shareholdings as the reason for this acquisition. It remains to be seen if Mitsubishi has other plans regarding this merger.

Prior agreement between Honda and Nissan

Honda and Nissan had, prior to this MoU, entered into an agreement to collaborate for developing EV platforms and components. Furthermore, they had started loosening ties with their respective long-term partners — Nissan with Renault, and Honda with General Motors. 

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Honda’s upper hand

Honda seems to have the upper hand in this arrangement, with it expected to nominate the majority of the board members of the consequent holding company. The President and certain other top executives are also expected to be selected from the directors nominated by Honda. 

Honda Motorcycles and other businesses included

The discussions would not include just the automotive business of Honda, but also its motorcycle, aviation, and other businesses. Honda’s representative said, “Business integration will not only bring together the two companies’ automobile businesses, but also include the world’s best motorcycles, which is Honda’s strength, as well as a wide range of mobility businesses including power products and aviation.”

On the other hand, the other two companies involved in these discussions have restricted the potential merger to their automotive businesses — Nissan Motor Corporation and Mitsubishi Motors.

Timeline committed

The representatives stated that they expect to sign a definitive agreement by June 2025, and subsequently get registered at the Tokyo Stock Exchange by August 2026. Honda and Nissan are to be wholly owned subsidiaries of the holding company and will be delisted from the Stock Exchange. The share transfer ratio is yet to be determined. 

Complement, not supplement

The representatives highlighted that the purpose of the merger is to pool in technology and human resources, and share costs. The companies shall continue to build their separate businesses and technologies rather than solely working under this new holding company. The merger has been envisioned to enable the entities to be complementary to each other rather than just remaining one another’s supplementaries. 

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Possible implications

It is hard to predict what the implications of the outcome of these talks will be in both cases — the merger happening or failing. There’s a possibility that there could be job losses due to redundancies, and clashes between management, while on the other hand, we could see wonderful products coming out of the new holding company. It is too soon to comment affirmatively in one direction.

Relevancy to Indian context

The potential merger shall have strong implications to the Indian entities too, with Honda Cars India, Honda Motorcycle and Scooter India, and Nissan Motor India being wholly-owned subsidiaries of their respective global companies. Nissan and Renault have a joint manufacturing facility near Chennai, the future of which remains uncertain. Honda’s sales in India have also been on the decline in the recent past, with its share being grabbed by both newer and established carmakers such as Kia and Maruti Suzuki. The merger shall have implications on Honda India, Nissan India, as well as Renault India due to its close relationship with Nissan. 

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