Automotive giants Nissan Motor Co. (NSANY) and Honda Motor Co. (HMC) are reportedly holding talks about a possible merger.
The two Japanese automakers are apparently looking to merge to help them better compete with larger rivals such as Toyota Motor Corp. (TM), and so that they can invest more in electric vehicles.
Nissan shares gained 23.7% on the merger news, notching the company’s best day on the stock market since 1985, according to data from FactSet. Honda shares slipped 3% on the day.
Honda and Nissan are considering operating under a holding company and will soon sign a memorandum of understanding (MOU), according to multiple media reports.
Additionally, Nissan and Honda plan to eventually bring Mitsubishi Motors into the automotive holding company. Nissan is the top shareholder in Mitsubishi with a 24% stake.
Nissan has posted poor financial results throughout this year and lowered its guidance on several occasions. The automaker has also announced plans to cut 9,000 jobs and reduce its production capacity by a fifth.
Nissan has responded to media requests for comment by saying that it is considering collaborating with Honda and Mitsubishi Motors, but no final decisions have been made.
A combined Nissan and Honda would have expertise in not only traditional gas-powered vehicles, but also hybrids, battery electric and hydrogen vehicles.
The combined Nissan-Honda-Mitsubishi enterprise would also produce more than eight million vehicles annually.
That would place the company among the world’s largest automakers, but still below Toyota at 11.2 million vehicles and German automaker Volkswagen (VOW3) with 9.2 million vehicles.
The merger report also comes after Nissan and Honda entered into a strategic partnership earlier this year to share automotive components and software.
Should the merger between Nissan and Honda occur, it would be the largest auto industry merger since Fiat Chrysler joined with France’s PSA Groupe to form Stellantis (STLA) in 2021.
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