Honda 7267 and Nissan 7201 announced to finalize a business integration by June 2025 and set up a holding company through share transfer. Shares of the holding company will be listed in August 2026 while Honda and Nissan would delist. The integration will also include Nissan’s 24%-owned Mitsubishi Motors.
Why it matters: Nissan’s share price gained 25% in the past five days, recouping the loss after Nissan reported a quarterly loss and slashed operating profit guidance by 70% last month. We think the potential merger is primarily driven by the growing competition from electric vehicles, or EVs.
Honda also announced that it will buy back as much as JPY 1.1 trillion (£5 billion) of its own shares, equivalent to 24% of its total issued shares, between January and December 2025.
The bottom line: We keep our fair value estimates unchanged at JPY 2,000 for Honda and JPY 700 for Nissan. While we view both shares as undervalued, we are skeptical that the merged entity could easily defend competition from Tesla and Chinese EV manufacturers as both companies lack compelling EV models.
Honda sold 4.1 million light vehicles in fiscal 2024 and Nissan sold 3.4 million. The combined entity would create the world’s third-largest auto group after Toyota and Volkswagen. However, given the overlap of model portfolios, it may take longer than anticipated to fix the troubled business.
Between the lines: The automakers expect the new entity to achieve revenue exceeding JPY 30 trillion and operating profit of more than JPY 3 trillion by realizing synergies as the two companies standardize vehicle platforms, streamline costs, rationalize capacity, and co-invest in EV development.
With Renault being Nissan’s largest shareholder—it holds a 35.7% stake in Nissan—we believe a Honda-Nissan merger would be positive for Renault if the transaction could improve Nissan’s equity value and turn around the struggling business.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
