Honda and Nissan are likely to unveil on Monday a pact to explore a merger by setting up a joint holding company, to reach a deal by June 2025.
The consolidation would create the world’s third-largest auto group by vehicle sales after Toyota and Volkswagen as legacy carmakers face growing challenges from Tesla and Chinese rivals.
Honda, Japan’s second-biggest automaker after Toyota, has a market capitalization of more than $40 billion.
Nissan is third-ranked and is valued at about $10 billion.
The automakers said they will hold a joint Press conference on Monday at 0800 GMT.
They said that the head of Nissan partner Mitsubishi Motors will join their chief executives, at the Press conference.
The sources spoke on condition of anonymity because the information was not public.
Honda and Nissan aim to finalise the deal by June 2025 and set up a holding company in August 2026, when its shares will be listed while Honda and Nissan would delist, a source said.
Honda will appoint the majority of the holding company’s board, including its leader, the person added.
The integration of the two Japanese brands would mark the biggest reshaping in the global auto industry since Fiat Chrysler Automobiles and PSA merged in 2021 to create Stellantis in a $52 billion deal.
Combining Mitsubishi Motors would take the Japanese group’s global sales to more than eight million cars.
The current number three group are South Korea’s Hyundai and Kia
Honda and Nissan have been exploring ways to bolster their partnership, including a merger, Reuters reported last week.
The two companies said in March they were considering cooperation on electrification and software development.
They agreed to conduct joint research and widened the collaboration to Mitsubishi Motors in August.
Last month, Nissan announced a plan to cut 9,000 jobs and 20% of its global production capacity after sales plunged in the key China and U.S. markets.
Honda also reported worse-than-expected earnings due to declining sales in China.
Like other foreign carmakers, Honda and Nissan have lost ground in the world’s biggest market China amid the rise of BYD and other local brands that make electric and hybrid cars loaded with innovative software.
In a separate online Press conference with the Foreign Correspondents Club of Japan on Monday, former Nissan Chairman Carlos Ghosn said he did not believe that the Honda-Nissan alliance would be successful.
Ghosn said that the two automakers were not complementary.
Notably, Ghosn is wanted as a fugitive in Japan for jumping bail and fleeing to Lebanon.
His 2018 arrest for financial wrongdoing pitched Nissan into a crisis.
French automaker Renault, Nissan’s largest shareholder, is open in principle to a deal and would examine all the implications of a tie-up, sources have said.
Taiwan’s Foxconn, seeking to expand its nascent EV contract manufacturing business, approached Nissan about a bid but the Japanese company rejected it, sources have told Reuters.
Foxconn decided to pause the approach after it sent a delegation to meet with Renault in France, Bloomberg News reported on Friday.
Shares in Honda ended up 3.8%, Nissan rose 1.6% and Mitsubishi Motors gained 5.3% on Monday after the news reports on the details of the planned merger, while the benchmark Nikkei was up 1.2%.
(With inputs from Reuters)
