Honda Motor Co.'s stock surged around 5% in the last 24 hours on Monday, December 23, 2024, following a significant announcement of a planned merger with fellow Japanese automaker Nissan Motor Co.
The two companies signed a memorandum of understanding to explore integrating their businesses through a joint holding company, with plans to finalize the details by June 2025 and complete the merger in August 2026. The combined entity is expected to become the world's third-largest automaker in terms of annual sales, behind Toyota and Volkswagen.
The proposed merger is driven by the rapidly changing landscape of the auto industry, with increasing competition from Chinese automakers like BYD and new electric vehicle (EV) players like Tesla. By combining resources, Honda and Nissan aim to streamline their supply chains, optimize manufacturing processes, cut costs, and boost their competitiveness in areas like intelligent driving technology and electric vehicles.
It is still undecided whether Mitsubishi Motors, in which Nissan holds a stake, will be included in the merger. However, the companies have signed a separate memorandum of understanding to explore Mitsubishi's potential involvement and synergies.
Honda's CEO, Toshihiro Mibe, emphasized the need for such a merger, stating, "We have to build up capabilities to fight with them [new competitors] by 2030, otherwise we'll be beaten." The companies aim to create an entity with over $190 billion in revenue and $19 billion in operating profit, leveraging their combined scale and resources.
