Official: Nissan and Honda announce plans to merge to take on Chinese car industry

Nissan and Honda have said they want to merge. The result would be one of the the world's top-five car companies. Their combined sales are about eight million cars a year, with a turnover of £150bn a year.

They've said a prime motivation is to take on the Chinese, who are chewing up global car sales at huge pace. Electrification is of course another costly challenge.

Nissan had an early EV lead with the Leaf, but has fallen back in recent years. Nissan owns most of Mitsubishi motors too, and that would likely be included in the deal. That's another company that launched fast then stuttered with EVs and PHEVs.

Honda once entered an agreement to make EVs with GM, then backed away, then began working with Sony, and has this year began to preview solo efforts in EVs. That sort of indecision has left it exposed.

Nissan has a longstanding cross-shareholding and alliance with Renault over purchasing and platforms, but that co-operation has been cooling off in the last few years. Renault has issued a brief statement following the Honda news saying it will 'consider all options' but that existing projects will continue. For instance a Renault plant in France is just getting ready to build a new Nissan Micra EV based on the R5.

Yet Nissan and Honda agreed in March 2024 to co-operate on EV development, another sign the Renault relationship was going sour.

But the real problem is that both Nissan and Honda are complex companies with too much cost, and they see cheaper Chinese rivals as near-mortal.

They expect to establish a joint holding company by mid-2025 that would own both companies, and the financial independence of each would end by mid 2026. They would begin to share purchasing, technologies, platforms and factories. So Hondas could be built at Sunderland after a few years, once the cars have enough under-skin commonality.

Stepping back from today's news, any analysis would have to look at the histories of the two companies. Nissan is turning its back on a deep and at times very successful alliance with Renault. Honda is a fiercely independent-minded company which has not only built cars different from everyone else's, but has for its entire history rejected the idea of mergers every time such talk has been fashionable.

A merger doesn't only have to make industrial and financial logic. It has to make cultural sense too. Our question about this one is, do the people in these companies make good bedfellows?

If staff of either Nissan or Honda continue to think of it as 'us and them', if they argue about the best way of doing things rather than act collaboratively, then it's doomed. If they understand the need for working as one, and see the rest of the industry as the 'them', then it's in with a chance. Because there are many smart people in both Honda and Nissan.