Honda and Nissan: A Marriage of Convenience in the EV Era

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In December, Honda and Nissan announced their intention to merge by 2026, “a historic pivot for Japan’s auto industry that underlines the threat Chinese EV makers now pose to the world’s long-dominant legacy car makers,” Reuters reports, noting that the combined company would be the world's third-largest auto group by vehicle sales after Toyota and Volkswagen.

“It would also give the two companies scale and a chance to share resources in the face of intense competition from more nimble Chinese rivals, such as BYD,” the news outlet says, noting that the merger of Japan’s second- and third-largest automakers would be “the biggest reshaping in the global auto industry since Fiat Chrysler Automobiles and PSA merged in 2021 to create Stellantis in a $52-billion deal.”

Transitioning Away from Fossil Fuels

The two companies have already signed a memorandum of understanding, with Nissan alliance member Mitsubishi Motors also agreeing to join the talks on integrating their businesses. AP says Honda will initially lead the new management, retaining the principles and brands of each company.

"Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future. If realized, I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands,” Makoto Uchida, Nissan president and CEO, said in a press release. “Together, we can create a unique way for them to enjoy cars that neither company could achieve alone."

The broader transition away from fossil fuels in the auto sector may be a key driver behind the Nissan-Honda merger. “The ascent of Chinese automakers is rattling the industry at a time when manufacturers are struggling to shift from fossil fuel-driven vehicles to electrics,” AP reports. “Relatively inexpensive EVs from China’s BYD, Great Wall and Nio are eating into the market shares of U.S. and Japanese car companies in China and elsewhere.”

“Japanese automakers have lagged behind big rivals in EVs and are now trying to cut costs and make up for lost time,” it adds, noting Toyota made 11.5 million vehicles in 2023, while Honda rolled out 4 million and Nissan produced 3.4 million. Mitsubishi Motors made just over 1 million.  

The Power of One

The Institute for Energy Research (IER) says the deal will bolster the involved companies’ efforts to develop new EVs and technology in general. It says both Honda and Nissan are committed to expanding their electrification and technology initiatives, with the former setting a target of producing more than 2 million EVs per year by 2030.

“By that year, [Honda] also plans for 40% of its new vehicle sales to consist of electric and fuel-cell cars, with the goal of achieving 100% by 2040,” IER adds. “In addition, Honda plans to sell 1.3 million hybrid vehicles per year by 2030—doubling its 2023 hybrid sales—reflecting the strong demand for gasoline-electric hybrids in North America.”

Nissan pioneered the mass-market electric vehicle with the Leaf in 2010 and is now aiming for electric and hybrid vehicles to account for 60% of its global sales by 2030. IER says the automaker also plans to introduce 16 electrified models by 2026.

“[This] deal would bolster their efforts in electric vehicles and new technology. Japan’s once seemingly unbeatable auto industry is being reshaped by challenges from Tesla and Chinese rivals such as BYD,” IER points out. “As Tesla and BYD gain market share, legacy companies are forced to forge new alliances such as the one Honda and Nissan are considering.”