(Reuters) -Japanese auto giants Honda Motor and Nissan Motor will start negotiations to merge as they face increasing competition from larger global electric vehicle makers, the Nikkei newspaper reported on Tuesday.
The two companies have strengthened ties in recent months as they face stiff competition from Chinese EV makers, which has increased pressure on legacy brands struggling to make sufficient profits from their EV ventures.
Honda and Nissan issued identical statements saying the report on Nikkei’s merger talks had not been announced by either company. Reuters has not independently verified the report.
“As announced in March this year, Honda and Nissan are exploring various opportunities for future collaboration, leveraging each other’s strengths,” the companies said in separate statements, adding that they will notify stakeholders of any updates at an appropriate time .
Honda’s U.S.-listed shares rose 1.3% in afternoon trading.
Nissan and Honda, Japan’s third and second largest automakers after Toyota, are losing market share in China. That country accounted for nearly 70% of global EV sales in November, with more than 1.27 million purchased during the month.
The two had combined global sales of 7.4 million vehicles in 2023, but are facing challenges from EV makers, especially in China, where BYD and others have made great progress.
Global automakers General Motors and Ford Motor have also slowed investment in electric vehicles as high financing costs and poor charging infrastructure hinder their adoption despite government incentives.
In Europe, Volkswagen is locked in bitter talks with its union over cost cuts as the company struggles with falling demand and rising costs.
The global auto industry is also bracing for a possible rollback of EV-friendly policies by new US President Donald Trump, Reuters reports.
Honda and Nissan agreed in March to collaborate in their EV business, and in August they deepened their ties by collaborating on batteries, e-axles and other technology.
The automakers want to operate under one holding company and are expected to soon sign a Memorandum of Understanding for the new merged entity, the Nikkei reported.
Honda and Nissan also want to bring Mitsubishi Motors, in which Nissan is the largest shareholder with a 24% stake, into the holding company, to create one of the largest auto groups in the world, the report said.
The two companies’ interests in the new entity, along with other details, will be decided later, Nikkei said.
Either deal could be the largest in the industry since the $52 billion merger between Fiat Chrysler and PSA in 2021 to create Stellantis.
