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Honda and Nissan have opened talks to merge as the two Japanese carmakers confront a “crisis” caused by the shift to electric vehicles (EVs).
The companies on Monday confirmed they were in talks to combine at a joint press conference in Tokyo, following earlier reports that the pair were considering a combination.
Mitsubishi Motors, which has a partnership with Nissan, is also considering joining the deal.
A merger would create the world’s third-largest car manufacturer by sales, after Volkswagen and Toyota. The combined company would be worth around £42bn.
Toshihiro Mibe, Honda’s chief executive, said the merged group had the potential to deliver revenue of 30 trillion yen (£152bn) and profit of more than 3 trillion yen. The companies are aiming to seal an agreement by June 2025, followed by a listing on the Tokyo Stock Exchange in 2026.
The two companies said the deal was necessary to cope with “dramatic changes in the environment surrounding both companies and the automotive industry”.
Mr Mibe said that the companies needed to scale up to compete in the electric vehicle (EV) and self-driving car markets amid fierce competition from a new generation of Chinese carmakers and Tesla.
Both companies are also scrambling to meet stretching net zero EV sales goals around the world that punish manufacturers that sell too many petrol or diesel-powered vehicles.
Makoto Uchida, Nissan’s chief, said Honda was “a partner who can share the sense of crisis about the future”.
He said: “As the business environment for auto makers changes in the future, I believe we will not be able to get there unless we have the courage to change ourselves.”
Confirmation of the merger talks raised fears about the future of Nissan’s UK operations. The company employs 7,000 people in the UK, including at its Sunderland car plant in Tyne and Wear, where it produces its Qashqai, Juke and Leaf models. It supports 30,000 jobs in the supply chain.
Steve Bush, national officer for automotive at Unite, said: “Unite will be monitoring the progress of the merger talks closely and seeking assurances from Nissan about any potential impact on its UK operations.”
Nissan warned last month it was facing “a severe situation” as it cut its annual profit outlook from 500bn yen (£2.5bn) to just 150bn yen. It also set out plans to reduce production and scrap 9,000 jobs globally.
In the UK, executives have been lobbying ministers to water down punishing EV sales targets that fine companies £15,000 per vehicle outside the target.
Under the Government’s zero emission vehicle (ZEV) mandate, companies must ensure 22pc of the cars they sell in the UK are EVs. That target will rise to 80pc by 2030 and could be moved to 100pc. Labour has vowed to reinstate a 2030 ban on petrol and diesel cars, which had previously been pushed back to 2035 by Rishi Sunak.