Honda and Nissan are in talks to deepen ties and possibly merge

Tokyo: Honda Motor and Nissan Motor, Japan’s second- and third-largest automakers, are discussing ways to deepen their ties, including the possibility of a merger that could fundamentally restructure Japan’s car industry.

The merger talks between the two storied Japanese giants highlight the intense upheaval within the world’s auto industry, as carmakers grapple with expensive technological shifts, political instability and the rise of fast-growing Chinese rivals.

Although discussions are still at an early stage, the thinking at Nissan and Honda is that combining forces could provide the companies with the resources and scale necessary to navigate those immense pressures.

Last year, Honda sold 3.98 million vehicles and Nissan 3.37 million. Their combination could make them the world’s third-largest automaker group, behind their Japanese rival Toyota Group, which sold 11.23 million vehicles last year, and Volkswagen Group of Germany, which sold 9.23 million.

Honda and Nissan began collaborating this year on the development of electric vehicles. Over several months, their discussions have expanded to include the potential creation of a new company under which both automakers would operate, according to two people familiar with the matter who were not authorized to speak publicly.

Nissan and Honda are expected to sign a memorandum of understanding within the next week to formally begin discussions of partnership-broadening steps, including the details of a potential merger, the people familiar with the matter said. No final decisions have been made, they said.

The possibility of merging forces would have been largely unthinkable for two Japanese titans of automaking just a decade ago. The talks underscore the level of churn in the industry as manufacturers move away from the internal combustion engine, which has powered the vehicles they have produced for most of the past century.

People at Honda and Nissan say a partnership could benefit both companies in a number of ways. Honda has a strong portfolio of fuel-efficient hybrid vehicles, and Nissan could help build out its global supply chain for batteries. Nissan was an early pioneer in electric vehicles and has several popular models, including the Sakura minivehicle it offers in Japan.

Nissan shares soared more than 20 per cent during trading in Tokyo on Wednesday as investors reacted to the news about a potential merger. Honda’s shares fell slightly.