(Bloomberg) – Honda Motor Co. and Nissan Motor Co. are preparing to start negotiations on a possible merger that could eventually be expanded to include Mitsubishi Motors Corp., Japan’s Nikkei reported Tuesday.
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Such a deal would threaten Toyota Motor Corp.’s automotive rival. that would effectively consolidate Japan’s auto industry into two camps. It would also give Honda and Nissan more resources to compete with larger rivals after downsizing long-standing global partnerships with other automakers: France’s Renault SA for Nissan and General Motors Co. for Honda.
The move towards a merger would follow a decision by the two companies earlier this year to collaborate on batteries and software for electric vehicles. At the time, Honda CEO Toshihiro Mibe suggested the possibility of a capital tie with Nissan.
While Honda and Nissan did not confirm Tuesday’s report, both automakers issued statements reiterating their previous commitments for further future cooperation.
“We will inform our stakeholders of any updates at an appropriate time,” Honda said in a statement.
American depositary receipts for Honda and Nissan shares rose on the report. Nissan’s ADRs rose 11% and Honda’s rose 0.9% in late New York trading.
Tackling Tesla
The two major Japanese automakers plan to sign a Memorandum of Understanding to discuss shared equity interests in a new holding company under which the combined company would operate, the Nikkei said, without citing sources. The merger would help the manufacturers compete with electric vehicle rivals such as Tesla Inc. and Chinese automakers, the report said.
It also puts them in a better position to compete at home and abroad with Toyota, the world’s largest automaker. Toyota has taken shares in Subaru Corp., Suzuki Motor Corp. and Mazda Motor Corp., creating a powerhouse of brands backed by its excellent credit rating. Honda, Nissan and Mitsubishi sold about 4 million vehicles worldwide in the first six months of the year, well below the 5.2 million Toyota sold on its own.
What Bloomberg Intelligence Says
If the companies were to team up with Mitsubishi Motors, as reported by Nikkei, it would create a 6.7 million unit group, bigger than General Motors but behind Hyundai, and raise further questions about the group’s strategy with Renault.
— Joel Levington, director of credit research
