News broke that Honda and Nissan were negotiating a merger, Tokyo stopped trading in Nissan shares

On December 18, NHK reported that two major auto manufacturers, Honda and Nissan, are discussing a merger. Sources say the two companies are considering establishing a joint stock company to be the parent company of both Honda and Nissan.

Kyodo News news agency said the merger information appeared at a time when global competition in the electric vehicle segment and other industries was fierce. Japan’s second and third largest automakers (after Toyota) want to join forces to challenge electric car companies from China and the US.

In March, Honda and Nissan agreed to begin studying strategic cooperation in electric car production and software technology to reduce costs and improve competition. By August, Mitsubishi Motors also joined the dialogue.

Honda General Director Mibe Toshihiro said at that time that the dialogue was not related to the capital binding plan but did not rule out that possibility in the future.

Immediately after the above information appeared, the Tokyo Stock Exchange temporarily suspended trading of Nissan shares to prevent impact on investors’ decisions, according to AFP.

Honda and Nissan both encountered business difficulties this year. In November, Honda cut its net profit forecast for the current fiscal year (ending in March 2025) to 950 billion yen ($6.2 billion), down 14.2% from the previous year, due to higher sales. Car sales in China were worse than expected.

The same month, Nissan announced plans to cut 9,000 jobs and reduce global productivity by 20% due to continued difficulties in business operations in the US and China.

According to Reuters, the total global sales of Honda and Nissan in 2023 are 7.4 million vehicles. Honda’s market capitalization is $38.8 billion while Nissan’s is $7.6 billion. If the merger goes through, it would be the biggest deal in the auto industry since the $52 billion merger between Fiat Chrysler and PSA in 2021 that created Stellantis.