Nissan and Honda merger possible by 2026

Japanese car brands Nissan and Honda will explore the possibility of a merger in response to growing competition from Chinese car makers.

If successful, the new business would become the world’s third largest car maker by volume.

Honda’s chief executive Toshihiro Mibe cited "the rise of Chinese power" as a major factor driving the plan, describing it as a critical step to remain competitive.

"We need a strategy to fight back by 2030, or risk being overtaken by rivals," he said.

Mitsubishi Motors, which is already part of an alliance with Nissan, is also taking part in the discussions.

The new alliance aims to strengthen its presence in the expanding electric vehicle (EV) market, where Chinese manufacturers, including BYD, have gained significant ground. The dominance of Chinese-made EVs has posed a serious challenge to some of the industry's most iconic brands.

"The structure of the automobile industry is evolving, driven by the rise of Chinese power and other emerging forces,” Mibe told reporters during a press conference discussing the merger talks.

China’s competitive advantage, rooted in lower labour and manufacturing costs, has enabled its carmakers to produce and price vehicles more competitively than most European and Japanese vehicle manufacturers.

As a result, China has become the world’s largest producer of electric vehicles, reshaping the global automotive landscape.

In March, Nissan and Honda agreed to explore a strategic partnership for electric vehicles.

"The talks started because we believe that we must build up capabilities to fight them, including the current emerging forces, by 2030. Otherwise we will be beaten", said Mibe.

He added that the deal was not a bailout of Nissan, which has been struggling with falling sales. The merger is conditional on the turnaround of Nissan, however.

Nissan director, president, CEO and representative executive officer Makoto Uchida said: "I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands. Together, we can create a unique way for them to enjoy cars that neither company could achieve alone."

The merger would likely also require Nissan to unwind its alliance with Renault Group. Renault, which is the main shareholder of Nissan currently, said the merger talks "are still at an early stage" and it would consider all options based on the best interest of the group and its stakeholders. 

"Renault Group continues to execute its strategy and to roll-out projects that create value for the group, including projects already launched within the Alliance," said its statement.

Combined, the total sales of Nissan and Honda generate £152 billion revenue.