By David Dolan
TOKYO (Reuters) – Honda (HMC) and Nissan (NSANY) expect big benefits from their potential merger to create the world’s third-largest auto group, but fierce competition from China is raising questions about whether they can make it happen in time work.
Japan’s automakers said Monday they had agreed to formal talks on a merger. While the outcome is uncertain and will depend in part on struggling Nissan making progress in its turnaround, they are aiming to complete the deal by August 2026.
Nissan’s junior partner, Mitsubishi Motors, will decide next month whether it plans to participate.
The automakers are aiming for more than 1 trillion yen ($6.4 billion) in synergies by leveraging a common platform, shared research and development (R&D) and joint purchasing.
Their operating profit target of over 3 trillion yen represents a 54% increase over their combined results last year.
But the full effect of the synergies likely won’t be felt until after 2030, Honda CEO Toshihiro Mibe told a joint press conference on Monday. The companies must build capacity by then to take on Chinese rivals, he said, or risk being “beaten.”
Analysts wonder if they have that much time.
The biggest immediate hurdle for both may be their model lineup. Neither is particularly strong in EVs. Although Nissan was an early pioneer with the Leaf, it later stumbled. A new electric car, the Ariya, was set to challenge Tesla’s Model Y but was hampered by production issues.
Honda has focused more on hybrids and, unlike Nissan, offers the models in the United States, where demand for the cars has soared.
“Both companies lack compelling EV offerings, and the combined entity would still face the challenge of a new EV model pipeline and technology R&D,” said Vincent Sun, senior analyst at Morningstar.
A standardized vehicle platform would provide cost synergies, but that too would take time to develop.
It “may take longer than expected” to get things in order, Sun said.
In China, the shift to electrified cars has focused consumer interest on software-driven features and the in-car digital experience, areas where Chinese makers excel.
BYD and other domestic brands have zoomed past traditional automakers and launched electric vehicles and hybrids with innovative software. Both Honda and Nissan have lost ground in China, the world’s largest car market.
Honda last month reported a 15% drop in quarterly profit and has reduced its workforce in China. Nissan has already announced plans to cut 9,000 jobs worldwide and reduce production capacity by 20% due to declining sales in both China and the United States.
