Honda and Nissan plotting merger that could include Mitsubishi

Honda and Nissan are plotting a marriage that could create the world’s third-biggest automaker after Toyota and the Volkswagen Group.

The move is widely reported to be a response by the two old legacy brands to both the rapid growth of Tesla and the imminent threat of Chinese dominance in every key market the two brands are present in.

The arrangement, rumoured to potentially include Mitsubishi as well, would create a $US54 billion ($A86b) entity with annual sales that would top 7.4 million vehicles.

Back in March, Honda announced it had entered a strategic partnership with Nissan to build EVs together, but since then, Nissan’s financial woes have caught up with it, forcing both car-makers back into negotiations.

Just last month Nissan announced a $US2.6 billion ($A4.2b) cost-savings plan that involved slashing 9000 jobs and cutting global capacity by 20 per cent following a sales slump in the US and China.

The aggressive saving plan is a direct response to an 85 per cent plunge in the Q2 profit.

Nissan’s health is said to be so bad, the Financial Times newspaper reported that some thought the car-maker only had 12-14 months to survive.

The merger is being discussed behind the scenes, though some analysts suggest Honda will effectively bail-out Nissan.

As well as the looming threat from brands like BYD, Honda and Nissan have already expressed concerns about hefty tariffs that have been threatened by inbound president Donald Trump following both brands’ decision to move production to Mexico and thereby become a target of myriad sanctions.

If a merger is successful, analysts suggest both car-makers will be able to form a deeper cooperation on new technology with a greater economy of scales, helping them rival Toyota domestically and Chinese car-makers internationally.

Honda, Nissan and Mitsubishi have confirmed they were all considering opportunities for future collaboration, but all said no deal had been reached.

Renault, Nissan’s largest shareholder, has yet to comment on the deal but reports suggest the French firm would be open to the tie-up.

All car-makers involved in the potential merger saw the price of their stock rise following the announcement of the talks, including Renault.

It’s now tipped an announcement will be made in the coming days.

Earlier this year Honda announced it has ended a similar strategic alliance with GM that was originally supposed to help it launch 30 new EVs by 2030, it’s now thought those plans might be in jeopardy without a partner.

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