Honda and Nissan driving towards a merger

The two Japanese automakers, along with Mitsubishi, will operate together under a holding company if the merger goes ahead, according to a Nikkei Asia report

The story said that the three automakers’ combined resources will better compete against Tesla and Chinese electric vehicle makers such as BYD in a fast-changing automobile industry. 

The combined annual car sales of Honda, Nissan and Mitsubishi (whose top shareholder is Nissan) would be 8 million units, making it the third-largest automaking group in the world, behind leader Toyota and runner-up Volkswagen Group while potentially displacing the Korean conglomerate of Hyundai-Kia.  

Nikkei Asia also reported that Honda and Nissan laid the ground for negotiations in March, before entering a strategic partnership in August on the sharing of automotive components and software.

The rise of BYD and other emerging Chinese EV brands are rapidly expanding their footprint in the field with support from the Chinese government, while EVs and other new energy vehicles which include petrol-electric hybrids are expected to make up 40 percent of vehicle sales in China this year. The rise of ambitious Chinese EV automakers has weakened Japanese automakers' presence in China and Southeast Asia. 

The Nikkei Asia report mentioned Honda’s cutting of its global output capacity by around 10 percent, or half a million units; and Nissan’s 20 percent reduction in its production capacity and nearly 10 percent reduction in its worldwide workforce. 

Mitsubishi Motors, in which Nissan has a 24% stake, is part of the merger plan.