Honda and Nissan to merge by 2026

Nissan and Honda are almost certain to merge, creating a powerful Japanese auto-making group.

The two car brands released a statement to confirm that both car-makers have signed memorandum of understanding that will pave the way for them to join forces by 2026 in a decision that could include Mitsubishi.

In a move judged as an historic moment for the Japanese auto industry, the tie-up would create the world's third largest car-making group after Toyota and Volkswagen.

Motivated by the prospect of being able to pool resources and share the huge cost of developing its next-generation EVs, the merger of the two brands has been heralded as the only way the Honda and Nissan can challenge the likes of both Tesla and the looming threat of Chinese car-makers like BYD.

Joining forces would help both to streamline manufacturing, reduce overhead costs and help rapidly increase the R&D spending needed for future EVs, software-defined vehicles and driverless cars.

Post merger Honda-Nissan says it will be able to offer consumers "more attractive products".

Former Nissan boss Carlos Ghosn described the merger plans as a "desperate move" by companies in "panic mode" trying to stay afloat.

There's clearly no love lost from Nissan's former CEO Ghosn, who would likely be languishing in a Japanese jail if he didn't flee the country. He was later issued an arrest notification by Interpol in a bizarre turn of events that have seen the former business kingpin disgraced.

Nissan chief executive Makoto Uchida said: "The business environment continues to change significantly and faster than expected," and was confident the Japanese car-maker's future was bright.

The Honda-Nissan merger is set to be the biggest shake-up in the global car industry since Fiat Chrysler Automobiles merged with PSA in 2021, the new Honda-Nissan group could become even larger if Mitsubishi Motors also decides to join the new car-making Group.

Mitsubishi execs have until the end of January to decide whether or not to join the merged Nissan-Honda group or remain in its existing alliance with Renault.

Post the merger, Honda and Nissan say they will aim for combined sales worth 30 trillion yen ($A306 billion) and an operating profit of 3 trillion yen ($A30 billion).

Proposing a timeline that includes wrapping up final talks in 2025, the new holding company will be founded by August 2026.

With the inclusion of Mitsubishi, Honda-Nissan-Mitsubishi will sell more than 8 million vehicles bumping the world's third-biggest car brand (Hyundai and Kia) down to fourth place when it comes to global sales.

The merger comes at a time when Nissan has been given just 12 months to live as its sales dropped off a cliff in the US and China, prompting it to cull 9000 jobs and slash global production by 20 per cent.

Honda is also reportedly struggling due to a sales slump in China, although demand for its hybrids remain strong, while its motorcycle division continues to perform well.

Despite some claiming otherwise, Honda CEO Toshihiro Mibe was forced to clarify that the merger wasn't a bid by his car-maker to save Nissan.

"This is not a rescue of Nissan," declared Mibe-san, although he did go on to say a Nissan turnaround was a prerequisite for the marriage of the two brands.

Currently, Honda is worth around US$40 billion ($A64b) – almost four times that of Nissan and its size means that it will appoint the majority of the new holding company's board, effectively helping it gain control of the ailing brand.

"The rise of Chinese automakers and new players has changed the car industry quite a lot. We have to build up capabilities to fight with them by 2030, otherwise we'll be beaten," said the Honda CEO in a statement.

Where the new merger leaves Renault is still unclear, although Nissan execs have announced that it would continue to work with Renault on a "project basis", if there was a "synergy" to be found.

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