Tokyo, Japan – Japanese automakers Honda and Nissan announced on Monday plans to merge, forming the world's third-largest automaker in a bid to regain market share from electric vehicle giants like Tesla and Chinese competitors.

The combined entity aims to accelerate the development and production of electric vehicles and autonomous cars. Both companies said they would negotiate to establish a "single holding company."

Citing "drastic changes in the environment" and the "automotive industry," the companies stated that they expect their holding company to be listed on the Tokyo Stock Exchange by August 2026.

Mitsubishi Motors, in which Nissan holds a significant stake, indicated it would decide by the end of January whether to join the new alliance.

A Power Imbalance

While the merger is set to close in June 2025, it's unlikely to be a 50-50 partnership. Honda is expected to hold a dominant position, with the power to appoint the new conglomerate's president. The board of directors will be predominantly composed of Honda executives.

Both Honda and Nissan, the second and third largest automakers in Japan, are facing mounting pressure from consumers and intensifying competition, particularly from Chinese electric vehicle manufacturers like BYD. China surpassed Japan as the world's largest auto exporter last year, thanks to government support for its electric vehicle industry.

Nissan's Financial Troubles

Nissan, burdened by significant debt, announced last month plans to cut thousands of jobs and reported a 93% drop in its net profit for the first half of the year.

Honda CEO Toshihiro Mibe emphasized that the merger is "not a rescue" and stressed that a condition for the merger is that Nissan completes its reform plan. According to Kyodo News, Honda has demanded that Nissan achieve a "V-shaped recovery."

Ghosn Weighs In

Former Nissan CEO Carlos Ghosn, who is wanted in Japan on financial misconduct charges, criticized the merger via video link from his self-imposed exile in Lebanon. Ghosn argued that Nissan's decision to partner with its rival shows that it is in "panic mode."

"While the two companies may find synergies for the future, I don't see anything clear in this partnership," Ghosn said.

A Strategic Alliance

Honda and Nissan had previously agreed in March to explore a strategic partnership for electric vehicle applications and components. Mitsubishi Motors joined this alliance in August.

The merger is expected to bring significant changes to the global automotive industry, as the two Japanese giants combine forces to compete in the rapidly evolving electric vehicle market.