Honda and Nissan Discuss Potential Merger

Japanese shares of Honda Motor Co (NYSE:HMC) rose sharply on Tuesday after the firm announced discussions with peer Nissan Motor (OTC:NSANY) regarding a potential merger by 2026. Despite Honda's gains, Nissan’s shares fell significantly.

Honda shares surged as much as 14%, boosted by a 1.1 trillion yen ($7 billion) stock buyback announcement. Conversely, Nissan shares dropped by 7%.

Both companies revealed they were in talks about the merger, with Mitsubishi Motors Corp. (TYO:7211)—in which Nissan holds a 34% stake—also considering participation in the deal. The combined entity could be valued over $50 billion based on the market worth of all three manufacturers.

This merger could position them as the world’s third-largest automaker by sales, following Toyota Motor (NYSE:TM) and Volkswagen (ETR:VOWG). This strategic decision comes amid increasing competition in their key market, China, particularly from the rapidly growing electric vehicle sector.

Recently, Nissan announced plans to reduce its global workforce by 9,000 jobs and cut 20% of its production capacity, responding to declining sales in vital markets like China and the U.S. Meanwhile, Honda reported disappointing earnings partly due to decreased sales in China, but managed to maintain stability thanks to strong performance in motorcycle and hybrid vehicle segments.

During a press conference, executives from both companies expressed their ambition for combined sales of 30 trillion yen ($191 billion) and an operating profit exceeding 3 trillion yen through the potential merger.

They aim to finalize discussions by June 2025 and establish a holding company by August 2026, at which time both companies’ shares would be delisted.