Merger planned between Nissan and Honda to fight back against China's OEMs

Honda and Nissan are planning to merge in a strategic move to counter growing competition from the Chinese car industry.

The proposed merger would position the two Japanese automakers among the world's leading car manufacturers, joining the ranks of Toyota, Volkswagen Group and Geely.

Honda’s chief executive Toshihiro Mibe cited "the rise of Chinese power" as a major factor driving the plan, describing it as a critical step to remain competitive.

"We need a strategy to fight back by 2030, or risk being overtaken by rivals," he said.

The alliance aims to strengthen their presence in the expanding electric vehicle (EV) market, where Chinese manufacturers, including BYD, have gained significant ground. The dominance of Chinese-made EVs has posed a serious challenge to some of the industry's most iconic brands.

"The structure of the automobile industry is evolving, driven by the rise of Chinese power and other emerging forces," Mr. Mibe told reporters during a press conference discussing the merger talks.

China’s competitive advantage, rooted in lower labor and manufacturing costs, has enabled its carmakers to produce and price vehicles more competitively than most European and Japanese vehicle manufacturers.

As a result, China has become the world’s largest producer of electric vehicles, reshaping the global automotive landscape.

In March, the two Japanese carmakers agreed to explore a strategic partnership for electric vehicles (EVs). "The talks started because we believe that we must build up capabilities to fight them, including the current emerging forces, by 2030. Otherwise we will be beaten", said Mibe.

He added that the deal was not a bailout of Nissan, which has been struggling with falling sales. However the merger is conditional on the turnaround of Nissan.

It would likely also require Nissan to unwind its alliance with Renault Group. Renault, which is the main shareholder of Nissan currently, said the merger talks "are still at an early stage" and it would consider all options based on the best interest of the group and its stakeholders. 

"Renault Group continues to execute its strategy and to roll-out projects that create value for the group, including projects already launched within the Alliance," said its statement.

Combined, the total sales of Nissan and Honda generate £152 billion revenue.