Nissan and Honda are negotiating a merger of the two automakers

Unlock Editor’s Digest for free

Roula Khalaf, FT Editor, picks her favorite stories in this weekly newsletter.

Nissan and Honda are in exploratory talks about a merger of the two automakers that would create a Japanese giant worth $52 billion, according to people familiar with the matter.

The two companies are studying how to combine to help them compete better at a time when traditional automakers are struggling with China’s fast-growing electric vehicle makers and consumer demand. Trams are slower than expected.

Negotiations between Nissan and Honda are in the early stages and there are concerns about possible political backlash in Japan as the merger of the country’s two most famous car brands could lead to cuts. significant employment. the discussion said.

Nissan and Honda announced in March that they would cooperate to develop electric vehicles and have stepped up talks amid uncertainty about what Donald Trump’s return as US president will mean for automobile industry.

This year, shares of Nissan, which has a cross-shareholding structure with France’s Renault, have fallen 40%, giving the company a market capitalization of $8.2 billion. Honda has a market capitalization of $44 billion.

Nissan in November unveiled an emergency turnaround plan that included 9,000 lost their jobssaid it would cut global production capacity by 20%. The company lowered its profit forecast for the second time this year after losing money in the July-September quarter.

Nissan has been looking for an anchor investor for several months and the Financial Times reported last month that “all options” is being considered, including a merger with Honda.

The merger talks between Nissan and Honda were first reported by Nikkei. Nissan said on Tuesday night: “The content of [Nikkei] The report is not something that has been released by either company.”

It added: “As announced in March this year, Honda and Nissan are exploring various possibilities for future cooperation, capitalizing on each other’s strengths. If there are any updates, we will notify relevant parties at the appropriate time.”

Honda also issued a similar statement, saying it and Nissan are “exploring various possibilities for future collaboration.”

Renault declined to comment.

In August, Honda and Nissan said they would launch electric vehicles by the end of the decade as the two companies agreed to jointly develop software.

A merger between Nissan and Honda would give the expanding company a large manufacturing base in the US, giving both brands the ability to mitigate the impact of Trump’s proposed tariffs on imported goods. imported from Mexico. Nissan has significant manufacturing operations in Mexico.

The auto industry also expects Trump, a longtime critic of electric vehicles, to slow their adoption in the US, possibly by easing emissions regulations.

Nissan’s deteriorating financial performance comes after it failed to counter the decline in global electric vehicle sales with its powerful hybrid product: a car that combines battery power with a traditional combustion engine. Sales of these vehicles have helped Toyota.

Nissan has recently become a target of activist investors including Effissimo Capital Managementa Singapore-based hedge fund known for its high-profile campaigns against some of the biggest names in Japan, including Toshiba.

Nissan, which owns a stake in smaller rival Mitsubishi Motors, is planning a series of key product launches to try to regain growth momentum.

If merger talks continue between Nissan and Honda, the two companies will need to find a way to reconcile their radically different corporate cultures.

The FT reported last month that Renault would be willing to sell part of its stake in Nissan to Honda as part of a restructuring of its 25-year-old alliance.

A person close to Renault said a stronger relationship between Nissan and Honda could “only be positive” for the French group.

Renault realigned its alliance with Nissan last year, with the French group cutting its stake in the Japanese company to just under 36%.

Nissan has gained voting rights to its 15% stake in Renault. Nissan has a 15% voting stake in Renault.