Japanese car giants Honda and Nissan have confirmed they are in talks over a possible ‘mega-merger’ that could include Mitsubishi.

The merger would create the third-largest global carmaker in terms of annual sales

Honda and Nissan have signed a memorandum of understanding (MOU) to start discussions and considerations toward a business integration between the two companies through the establishment of a joint holding company.

The aim is for the deal to be completed by August 2026 and Honda would initially lead the new management.

A separate MOU explores the possibility of Mitsubishi Motors’ participation in the same company and a decision is expected by the end of January 2025.

The deal, first reported by Nikkei last week, would create the third-largest global carmaker in terms of annual sales after Toyota and Volkswagen, and would be the biggest merger in the industry since the deal between Fiat Chrysler and PSA in 2021 to create Stellantis.

The possible merger would pool technological expertise and business resources, helping the carmakers fight off rising threats and building on existing work to reposition for electric cars, along with autonomous vehicles.

This would build on Nissan and Honda’s existing collaboration; in March, the two Japanese carmakers announced a strategic partnership for EVs. This was deepened in August when the pair agreed to work together on batteries, e-axles and other technology.

Honda and Nissan are Japan’s second- and third-largest car manufacturers respectively but have struggled with the switch to EVs and the rise of the Chinese car brands. Nissan has also been hit by a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets.

The pair said the agreement was an option to “maintain global competitiveness and for the two companies to continue to deliver more attractive products and services to customers worldwide”.

If the duo go ahead with plans, the deal would integrate their respective management resources, create deeper synergies, enhance the ability to respond to market changes, and could improve mid- to long-term corporate value.

The integration would standardise the vehicle platforms of both companies across various product segments to “create stronger products, reduce costs, enhance development efficiencies and improve investment efficiencies through standardised production processes”.

It would also streamline their powertrain offerings – including ICE, HEV, PHEV and EV models – while ensuring they are “be better positioned to meet diverse customer needs around the world”.

A tie-up would also integrate R&D functions and optimise manufacturing systems and facilities.

And the two would seek to become a “leading global mobility company” by integrating Nissan and Honda’s four-wheel vehicle and Honda’s motorcycle and power products businesses.

Makoto Uchida, Nissan CEO, 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.”

Toshihiro Mibe, Honda’s CEO, added: “Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing. Honda and Nissan are two companies with distinctive strengths.”

Mibe added that the merger would create “new mobility value through chemical reaction that can only be driven through synthesis of the two teams”.