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BANGKOK (AP) — Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.
The two companies said they had signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors also had agreed to join the talks on integrating their businesses. Honda will initially lead the new management, retaining the principles and brands of each company.
Following is a quick look at what a combined Honda and Nissan would mean for the companies, and for the auto industry.
An industry shakeup
The ascent of Chinese automakers is rattling the industry at a time when manufacturers are struggling to shift from fossil fuel-driven vehicles to electrics. Relatively inexpensive EVs from China's BYD, Great Wall and Nio are eating into the market shares of U.S. and Japanese car companies in China and elsewhere.
Japanese automakers have lagged behind big rivals in EVs and are now trying to cut costs and make up for lost time.
Nissan, Honda and Mitsubishi announced in August that they will share components for electric vehicles like batteries and jointly research software for autonomous driving to adapt better to dramatic changes in the auto industry centered around electrification. A preliminary agreement between Honda, Japan's second-largest automaker, and Nissan, third largest, was announced in March.
A merger could result in a behemoth worth about $55 billion based on the market capitalization of all three automakers.
Joining forces would help the smaller Japanese automakers add scale to compete with Japan's market leader Toyota Motor Corp. and with Germany’s Volkswagen AG. Toyota itself has technology partnerships with Japan's Mazda Motor Corp. and Subaru Corp.
What would Honda need from Nissan?
Nissan has truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn't have, with large towing capacities and good off-road performance, said Sam Fiorani, vice president of AutoForecast Solutions.
Nissan also has years of experience building batteries and electric vehicles, and gas-electric hybird powertrains that could help Honda in developing its own EVs and next generation of hybrids, he said.
“Nissan does have some product segments where Honda doesn’t currently play,” that a merger or partnership could help, said Sam Abuelsamid, a Detroit-area automotive industry analsyt.
While Nissan's electric Leaf and Ariya haven't sold well in the U.S., they're solid vehicles, Fiorani said. “They haven't been resting on their laurels, and they have been developing this technology,” he said. “They have new products coming that could provide a good platform for Honda for its next generation.”