Honda and Nissan are considering a merger to take on rivals including Tesla

A new report has revealed that Honda and Nissan may be the next major car companies to form a merger following that of Fiat Chrysler and Peugeot SA in 2021 which borne Stellantis. Both Japanese car companies are reported to be considering forming a new holding company.

According to Nikkei Asia, anonymous sources have disclosed that Honda and Nissan have signed a memorandum of understanding detailing the plans for the merger. The merger will reportedly give both companies a fighting chance against rivals such as BYD and Tesla. It has also been revealed that both automakers are planning to include Mitsubishi which Nissan is the top shareholder with a 24% stake.

In relation to the matter, Honda and Nissan revealed to Reuters separately that they are exploring various possibilities for future collaboration, leveraging each other’s strengths. reaffirming an earlier announcement in March. However, neither confirmed a merger was happening. Reuters also revealed that Renault, a major shareholder in Nissan, declined to comment on the matter.

Major car companies are facing stiff competition from Tesla and Chinese brands, such as BYD, whose cars are increasingly popular in several markets including key ones such as China. However, of the two car brands, Nissan is the one that's struggling. Its market capitalization is about $7.6 billion compared to Honda's $38.8 billion. It has been reported that its half-year net earnings were down more than 90% compared to the same period a year ago, and it has had to slash its operating profit forecast by about 70%.

However, by merging with Honda, it may be able to stem these losses and get access to Honda's resources. It isn't a jolly ride for Honda either but it is doing much better. Its hybrid vehicles are selling quite well and it has some interesting vehicles coming soon such as a new Prelude, the first in more than 20 years. There is also the Honda 0 series of EVs which should hit the market in a few years.