It is said that Honda and Nissan will start merger negotiations.

According to people familiar with the matter, Japanese auto giants Honda Motor and Nissan Motor will enter merger negotiations and integrate their resources to better compete with the world’s larger electric vehicle manufacturers.

The report pointed out that the two companies are considering operating under the framework of a holding company, and it is expected that a Memorandum of Cooperation (MOU) will be signed soon, and their respective shareholding ratios in the new entity will be decided later. In addition, the two sides also plan to incorporate Mitsubishi Motors into the new entity. Nissan is the major shareholder of Mitsubishi Motors and holds 24% of the shares.

Honda and Nissan did not respond to requests for comment before the deadline.

Some analysts believe that the two companies have strengthened their relationship in recent months, and this move is to cope with the fierce competition from China electric vehicle manufacturers, and these traditional brands are under great pressure from the electric vehicle business.

Nissan and Honda are the third and second largest Japanese automakers after Toyota, and their market share in China has been declining. In November, the sales of electric vehicles in China accounted for nearly 70% of the global sales of electric vehicles, and the sales in that month exceeded 1.27 million vehicles.

In 2023, the global car sales of these two companies totaled 7.4 million vehicles, but they are struggling to meet the challenges from electric vehicle manufacturers, especially in China, and BYD and other companies are far ahead in China.

Honda is preparing to launch its new Honda Zero electric vehicle platform next year, and has achieved some success in the United States with its electric Prologue SUV based on General Motors. At the same time, Nissan’s Leaf launched in 2011 lost its early lead and only released an electric car, Ariya.

Both companies, as well as domestic competitor Toyota, have added more hybrid vehicles to their product roadmaps, instead of pure electric vehicles. This year, Nissan said it will launch 16 "electrified" models by 2026, while Honda hopes to launch a cool hybrid Prelude sports car next year.