Japanese carmakers Nissan Motor Co and Honda Motor Co on Monday signed an agreement to start merger talks and discuss business integration between the two companies by forming a joint holding company as they look to maintain global competitiveness amid stiff competition from Chinese automakers.

Shares of the newly established joint holding company are planned to be listed on the Tokyo Stock Exchange by August 2026.

With the listing of the joint holding company, both Nissan and Honda will become wholly owned subsidiaries of the joint holding company.

At the time of the effective date of the share transfer, it is planned that Honda will nominate a majority of each of the internal and external directors of the joint holding company. President and representative director or president and representative executive officer of the joint holding company will be selected from among the directors nominated by Honda, the companies say in a statement.

The two automakers plan to establish an integration preparatory committee which will examine and analyse more specific synergies.

The expected synergies from the business integration include scale advantages by standardising vehicle platforms of both companies across various product segments. The companies expect to create stronger products, reduce costs, enhance development efficiencies, and improve investment efficiencies through standardised production processes, the carmakers say.

“The integration is projected to increase sales and operational volumes, allowing the companies to reduce development costs per vehicle, including for future digital services, while maximising profits,” the statement says.

The partnership comes at a time when business environment for both companies and the wider automotive industry has rapidly changed. Automakers are facing stiff competition from Chinese carmakers, especially in electric vehicles.

“By accelerating the mutual complementation of their global vehicle offerings - including ICE, HEV, PHEV, and EV models - Nissan and Honda will be better positioned to meet diverse customer needs around the world and deliver optimal products, leading to improved customer satisfaction,” it says.

The two companies have started joint research in fundamental technologies in the area of vehicle platforms for next-generation software-defined vehicles (SDVs). “After the business integration, both companies will encompass more integrated collaboration across all R&D functions, including fundamental research and vehicle application technology research. This approach is expected to enable both companies to efficiently and swiftly enhance their technological expertise, achieving both improvements in development capabilities and reductions in development costs through the integration of overlapping functions,” it says.

The companies anticipate that optimising their manufacturing plants and energy service facilities, combined with improved collaboration through the shared use of production lines, will result in a substantial improvement in capacity utilisation leading to a decrease in fixed costs.

To fully leverage the synergies from optimising development and production capacity, both companies intend to boost their competitiveness by improving and streamlining purchasing operations and source common parts from the same the supply chain and in collaboration with business partners.

By integrating relevant areas of sales finance functions of both companies and expanding the scale of operations, the companies aim to provide a range of mobility solutions, including new financial services throughout the vehicle lifecycle, to customers of both organizations.

If the business integration is realised, both companies can aim to integrate their respective management resources such as knowledge, human resources, and technologies; create deeper synergies; enhance the ability to respond to market changes; and expect to improve mid- to long-term corporate value, the statement says.

“Nissan and Honda can aim to further contribute to the development of Japan's industrial base as a “leading global mobility company” by integrating Nissan and Honda's four-wheel-vehicle and Honda's motorcycle and power products businesses, continue to make the brands of both companies more attractive and deliver more attractive and innovative products and services to customers worldwide,” it adds.

"Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future. If realized, I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands. Together, we can create a unique way for them to enjoy cars that neither company could achieve alone,” says Nissan director, president, CEO and representative executive officer Makoto Uchida.

“Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing. Honda and Nissan are two companies with distinctive strengths. We are still at the stage of starting our review, and we have not decided on a business integration yet, but in order to find a direction for the possibility of business integration by the end of January 2025, we strive to be the one and only leading company that creates new mobility value through chemical reaction that can only be driven through synthesis of the two teams,” says Honda director and representative executive officer Toshihiro Mibe.