Investing.com -- Honda Motor Co (NYSE:HMC). and Nissan (OTC:NSANY) Motor Co., two of Japan’s leading auto manufacturers, have announced they are exploring the possibility of a merger. The companies revealed this development during a joint press briefing in Tokyo on Monday. In a move aimed at consolidating resources and strengthening their competitive position, the two companies are looking to withstand the increasing competition from Chinese auto manufacturers.
In addition to the merger talks, Honda also announced that it plans to buy back up to ¥1.1 trillion yen ($7 billion) of its own shares. The companies revealed plans to establish a holding company to oversee the proposed new entity, with the goal of listing it by August 2026. Honda will have the privilege to appoint a majority of the new company’s board of directors.
Mitsubishi Motors Corp. (TYO:7211), a company in which Nissan owns a 24.5% stake, has also signed the memorandum of understanding. It is anticipated that Mitsubishi might join the group, with a final decision expected by the end of January.
If the merger proceeds, it would result in one of the world’s largest carmakers. The combined entity would compete with Toyota Motor (NYSE:TM) Corp. in Japan and Chinese automakers such as BYD Co (SZ:002594). and Geely Automobile Holdings (OTC:GELYF) Ltd. internationally. Toyota already holds stakes in Subaru (OTC:FUJHY) Corp., Suzuki Motor Corp. (TYO:7269), and Mazda Motor Corp. (TYO:7261), creating a strong alliance of brands supported by its exceptional credit rating.
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