Bombshell in the automotive world: Honda and Nissan are considering merging to combat American and Chinese EVs

The Japanese automotive giants Honda and Nissan are about to study a merger, amid tough competition from companies like Tesla and BYD. The companies will explore the possibility of operating jointly under a holding company, and they might even include Mitsubishi in the mix.

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Nikkei Asia has reported that both companies have confirmed the talks. Nissan said it is considering “various aspects of future collaboration” with Honda and Mitsubishi, “including the content of media reports… but nothing has been decided at this time.”

Both car manufacturers have had it in mind for some time. Following a memorandum of understanding signed in March, Nissan and Honda partnered in August to research technologies for next-generation vehicle platforms. That same month, the pair also partnered with Mitsubishi to “jointly discuss a framework for greater intelligence and electrification of cars.”

Tesla and Chinese brands are the great enemy of Japanese and European cars

And it’s not just the big electric vehicle companies, like Tesla, that are threatening these three Japanese brands. Chinese brands have continued to conquer their territory, which is the largest automotive market in the world.

The BYD Seagull EV, priced at $9,700, surpassed the Tesla Model Y in sales last month to the Tesla Model Y and, literally, any other car in China, with over 56,000 units sold. These two models were closely followed by two other BYD cars in the November ranking.

Additionally, the International Energy Agency estimates that electric vehicle sales will account for 40% of all cars worldwide by 2030, and nearly 55% by 2035.

If Nissan, Honda, and Mitsubishi were to merge, they would become the third largest automotive group in the world after Volkswagen AG and Toyota, with combined sales of over 8 million vehicles.

Shareholders seem to think it’s a good idea. Nissan’s shares soared on the Tokyo Stock Exchange upon hearing the news of the possible merger, opening at 417.6 yen (2.7 dollars), 23.7% higher than the previous day’s close.

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The merger could be key to turning around a difficult period for Honda and Nissan. Both brands have seen their sales in China fall until 2024, and have cut 10% and 20% of their global production capacity, respectively. The future of these giants depends on a good decision now.