Tokyo, 18 DEC

Honda and Nissan are considering a merger to create a strong competitor to Toyota in Japan and improve their global market position. Honda is exploring several strategies, including a merger, capital tie-up, or forming a holding company, according to Executive Vice President Shinji Aoyama. This move comes amid reports of ongoing talks between the two carmakers.

Honda and Nissan are in early discussions about a possible merger, with one option being the creation of a new holding company for the combined entities. The deal could also involve Mitsubishi Motors, which already has financial ties with Nissan. These talks are confidential, and no final decision has been made yet.

Nissan's stock was expected to rise due to increased buying interest, while Honda's fell by up to 2%. A potential merger between the two would consolidate the Japanese auto industry into two main groups: one led by Honda, Nissan, and Mitsubishi, and another by Toyota and its affiliates. This move would provide the companies with more resources to compete globally, especially after reducing long-standing partnerships, such as Nissan’s with Renault and Honda’s with General Motors.

Nissan and Honda are planning to sign a memorandum of understanding to explore shared equity in a new holding company. This merger aims to help both companies strengthen their position in the electric vehicle market, competing against rivals such as Tesla and Chinese automakers

Honda and Nissan's American depositary receipts rose, with Nissan ADRs increasing by 12 per cent and Honda’s by 0.9 per cent. A potential merger could strengthen the companies against Toyota, as Honda, Nissan, and Mitsubishi combined sold about 4 million vehicles, far fewer than Toyota’s 5.2 million.