Honda and Nissan on Monday announced plans for a historic merger to create the world’s third-largest automaker.

This decision comes in response to the escalating competition in the electric vehicle (EV) market, particularly from Chinese manufacturers like BYD and global giants such as Tesla. 

Honda’s CEO, Toshihiro Mibe, emphasised the urgency: “We need to build the capabilities to compete by 2030, or risk being left behind.”

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A strategic alliance

The merger would establish a holding company by August 2026, combining Honda’s robust market presence with Nissan’s extensive experience in EV technology. 

This partnership also includes Mitsubishi Motors, enhancing their collective output to approximately 8 million vehicles annually. 

Both companies have faced challenges; Nissan has struggled with declining sales and job cuts, while Honda has reported lower earnings from its key markets.

Mibe highlighted that this merger is not a rescue for Nissan but a strategic move to bolster both companies’ competitiveness.

“This is not a rescue of Nissan,” he clarified, addressing concerns about the merger’s implications for Nissan’s ongoing recovery efforts.

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Future prospect 

The integration aims for combined annual sales of ¥30 trillion ($191 billion) and operating profits exceeding ¥3 trillion( $19 billion). 

The collaboration will allow both companies to share resources and streamline operations, which are critical steps as they pivot from fossil fuels toward electrification. Investor confidence surged following the announcement, with Honda’s shares rising significantly.

However, skepticism remains. Former Nissan Chairman Carlos Ghosn criticised the merger as a “desperate move,” suggesting that the two companies lack complementary strengths necessary for success.

As the automotive industry grows more competitive, Honda and Nissan are set to redefine their roles.