Honda and Nissan have made their merger plans official by announcing of signing a MoU (memorandum of understanding) creating 3rd largest automaker in the world.
The creation of a joint holding company as part of the proposed business integration is viewed as a calculated move to increase their competitiveness in the electric vehicle (EV) market and challenge the dominance of Chinese competitors and Tesla.
Establishing a joint holding company aims to share the resources by all member companies to keep production and R &D under control.
The two automakers intend to establish a holding company led by a president chosen by Honda. Following the companies' board meetings on Monday afternoon, a press briefing is anticipated.
Both Honda and Nissan are dealing with serious issues; the latter is in severe financial distress as a flood of electric and hybrid cars from Chinese rivals forces established brands to combine their resources.
Nissan needs a turnaround more than ever because of its declining sales in China and the US, which have compelled it to reduce production capacity, lay off employees, and cut its annual profit forecast by 70 per cent.
Merged entity
An operating profit of more than 3 trillion yen and combined yearly sales of 30 trillion yen are the goals of the merger. By June 2025, the companies hope to conclude negotiations, and by August 2026, the holding company should be up and running.
Earlier this year, Honda and Nissan announced plans to co-develop batteries, software, and other EV technologies with Mitsubishi Motors, starting the process of establishing a technical partnership.
