Investors Intrigued as Japanese Auto Giants Look to Partner in U.S.
Nissan walked away from Honda at the start of the year to seek other suitors. Now the pair aim to dance together again.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
I wrote this time last year about the pressure Nissan Motor (NSANY) (T:7201) was facing from activist investors. That pushed Japan’s No. 3 automaker into the arms of No. 2 Honda Motor (HMC) (T:7267), only for merger talks to fall apart spectacularly this February.
As I last left it, Nissan had issued a “come-and-get-me” plea to the tech sector.
Those calls were heard, by Honda! Nissan walked away because Honda was pushing to have a greater say in the combined entity, or even to buy out Nissan altogether. But the two companies pledged to seek ways to cooperate in the future.
New CEO, New Nissan
It sounded like a platitude, but those efforts do appear to have reaped rewards. New Nissan CEO Ivan Espinosa, appointed this April after the Honda deal collapsed, says part of his “Re:Nissan” initiative to turn the company around includes tighter ties with its rival.
“We are talking about how we can collaborate in the U.S.,” he says in an interview with The Nikkei business daily, at Nissan’s Yokohama HQ. “Is there any opportunity for joint product development or for powertrain development? These are the topics we are discussing.”
Investors like the sound of that. Word that the deal is in the works pushed shares of both carmakers higher on Thursday. Nissan ended Tokyo trade up 2.8%, while Honda rose 1.3%. Both are outdoing Thursday’s 0.7% broad-market gain in Tokyo.
It makes eminent sense. The merger talks grew out of a cooperative effort that the two companies inked in August 2024 to work together on vehicle software, artificial intelligence, electrification and batteries.
'Open to Anything'
It has however been a savage year for Nissan, which has been seeing sales slump in key markets such as the United States, not to mention at home.
That was occurring before the sharp increase in U.S. tariffs. U.S. import taxes on Japan-made cars currently stand at 15%, up dramatically from the previous rate of 2.5%. While the U.S. Supreme Court appears highly skeptical of Trump administration tariffs, and may strike down those justified as a “national emergency,” countries such as Japan, South Korea and the United Kingdom have directly agreed car-import duties at a lower rate than the 25% level set worldwide in March.
Espinosa, who is originally from Mexico, says the current talks aren’t related to tariffs. But a collaboration could help both companies ward off the worst of the Trump trade policy.
Nissan already makes vehicles within the United States at factories in Tennessee and Mississippi. Honda operates two production sites in Ohio, with other factories in Indiana and Alabama.
“We are open to anything,” Espinosa said. “The good thing is, both companies have very good coverage in the U.S. in terms of manufacturing, supply network and also engineering capabilities.”
That, he added, gives the companies a lot of “options to explore.” Based on the lessons learned earlier this year, any deal will not involve business integration or capital tie ups. But he says the “spirit of the discussions is very constructive, very positive.”
Third-Largest Car Group
A Nissan-Honda combination would have made the duo the third-largest car grouping, behind only world leader Toyota Motor (TM) (T:7203) and second-largest Volkswagen Group (VLKAF) .
Honda sold 3.7 million vehicles in fiscal 2024, around one-third of them made within the United States. Nissan shifted 3.1 million vehicles in 2024, around one-sixth of them made stateside.
Both companies are staring at big temporary losses stemming from tariffs. Honda estimates the hit to the bottom line for fiscal 2026, which runs through March, will run around ¥385 billion. Nissan expects a fiscal 2026 tariff hit will run around ¥385 billion ($2.5 billion). Nissan expects a fiscal 2026 tariff hit of ¥275 billion ($1.8 billion).
Nissan stock is down a punishing 21.3% for 2025, suffering a series of sharp selloffs. Chief among those descents, the shares fell 29.5% in just three weeks surrounding the end of the fiscal year on March 31.
Honda is essentially flat for the year, down 0.9%, but that’s against a backdrop of a weak Japanese yen that should be boosting profits. Both the broad-market Topix and the blue-chip, exporter-heavy Nikkei 225 have notched recent fresh record highs, with the Nikkei up 30.5% so far this year, and the Topix up 22.7%.
Shedding Production Sites
The “Re:Nissan” initiative calls for the company to shed 20,000 jobs globally and slash its number of assembly plants from 17 now to 10 around the world by March 2028. Nissan has grown disillusioned with its current cooperative efforts with Renault and Mitsubishi Motors, and has amended Nissan’s required level of cross-shareholding in both of those partners.
The Trump tariffs won’t last forever. The unspoken issue facing both Japanese and Korean carmakers is the stiff competition they face from rivals in China, which are ramping up exports massively into markets like Europe, and making their first forays into foreign production.
Through September, Nissan sales so far in 2025 were down 16.5% within Japan, and down 7.9% in Europe. So the 0.9% decline in sales for the United States actually represents stabilization, with sales actually turning higher within China itself.
Closer cooperation between Nissan and Honda should help them stand up better to the Chinese competition, particularly when it comes to new-energy vehicles. Although Nissan made the first mass-market battery car in the form of the Leaf, Japan’s automakers have been slow on the EV front, so this business combination aims to make up for lost time.
