TOKYO, Dec. 24 (Xinhua) -- Japanese automakers Honda Motor and Nissan have agreed to begin merger talks, hoping to establish a new holding company by around August 2026, driven by the global auto industry's fierce competition in electrification and software integration, while analysts said the alliance faces structural obstacles.
The two companies on Monday signed a memorandum of understanding to start discussions toward a business integration under a new holding company, creating the world's third-largest automaker group to compete with U.S. and Chinese competitors in the electric vehicle market.
Honda and Nissan, Japan's second- and third-largest automakers by volume, respectively, aim to wrap up negotiations on the terms of the merger by June 2025, while Mitsubishi Motors, Nissan's partner, will decide by the end of January 2025 on whether to join the merger, the automakers said at a news conference.
Each company would operate under its own brand in the holding company that will aim to list shares shortly after it is established.
The merged entity would create the world's third largest automaker by volume after Toyota Motor and the Volkswagen Group, expanding development of EVs and self-driving tech while coming to the rescue of struggling Nissan.
In the first half of this fiscal year, Nissan's net profit fell more than 90 percent mainly due to sluggish sales in the U.S. and China. Following the disappointing earnings report, the company announced it would cut 9,000 jobs worldwide and reduce its global production capacity by 20 percent.
Nissan will press ahead with its restructuring measures before the two automakers conclude their merger talks, the companies said.
Before Monday's merger talks kicked off, Honda and Nissan already agreed in March to commence a feasibility study on a strategic partnership in EV production and software technologies to cut costs and improve competitiveness, with Mitsubishi Motors joining the talks in August.
"We hope Japanese companies will take steps to respond to these changes and take measures to survive and win amid international competition," top government spokesman Yoshimasa Hayashi said Monday.
Meanwhile, former Nissan Motor Chairman Carlos Ghosn, who fled Japan while awaiting trial on charges of financial misconduct, said Monday that the planned merger can not work as he sees limited potential for synergy.
Ghosn said that there was "no complementarity" between the two makers, noting Nissan asked Honda for help "in panic mode." Analysts, meanwhile, have pointed out that Nissan and Honda have similar production lineups and market operations.
The two companies have strengths and weaknesses in "the same fields," Ghosn said, adding it is possible that "they can find synergies for the future ... but the premises don't look good."
Auto industry experts said both companies have developed their businesses based on their own strategies. Therefore, it will be difficult for them to produce significant effects quickly through expanding the scope of their collaboration to include batteries, software, and autonomous driving.
However, in the mid- to long-term, this is good for the Japanese car industry as it creates a second axis against Toyota. Constructive rivalry with Toyota is positive for the rather stagnating Japanese car industry when it must keep up with the competition amid a rapidly changing business environment, they added.
"To lead the mobility transformation, we've come to think that we need something bolder than just cooperation in some specific fields," Honda President and CEO Toshihiro Mibe said Monday, "We have reconfirmed that a merger would create synergies in all kinds of fields."
Obtaining the synergy goals would help a combined Nissan and Honda "become a world-class mobility company" with sales revenue exceeding 30 trillion yen (about 190 billion U.S. dollars) and operating profit of more than 3 trillion yen," Honda and Nissan said in a joint statement on Monday.
The new holding company is expected to be nominated by Honda, which will make up a majority of directors of the integrated company. As of Monday, Honda's market capitalization was at 6.7 trillion yen, while Nissan's was at 1.6 trillion yen. ■