Japanese automakers Nissan and Honda has announced merger plans aimed at creating world’s largest auto groups-after signing a memorandum of understanding on Monday to formally begin talks that began earlier this year.
In a press conference on Monday, Honda CEO Toshihiro Mibe said the companies needed greater scale to compete in the development of new technologies in electric vehicles and intelligent driving.
Unlike the gasoline-powered cars that have defined the industry for most of the past century, more vehicles today are being equipped with batteries, electric motors and advanced software that enable features such as autonomous driving.
According to the memorandum, over the next six months, the companies will discuss combining their operations under a holding company, with a plan to complete the merger in August 2026.
The deal is seen as a lifeline in particular for Nissan, which has been slashing jobs and production amid faltering sales.
Nissan sells more than 3 million vehicles a year, while Honda sells nearly 4 million. A merger would position them as the world’s third-largest automaker group, behind Toyota, whose brands sold 11 million vehicles last year, and Volkswagen, which sold 9 million.
Last year, Nissan and its longtime French partner, Renault, agreed to take steps to unwind their alliance. Around the same time, Honda and G.M. decided to scrap a plan to develop a line of lower-priced electric vehicles, less than two years after the companies announced the joint effort.
However, compared with Nissan, Honda’s financial position remains relatively healthy. Honda turned a $1.8 billion profit in the recent July-September quarter, but that was down 15 percent from a year earlier because of higher research- and-development costs and weak sales in China.
