The world's third largest car company is being established.

Japanese automakers Honda and Nissan announced that they have begun merger talks to create the world's third-largest automaker in the face of tough global competition in the electric vehicle sector. In a joint statement from the companies, it was noted that the Japanese automakers have signed a memorandum of understanding for merger talks under a common holding company.

MITSUBISHI MAY JOIN THE GROUP

Mitsubishi, which holds a 24.5% stake in Nissan, also signed the memorandum of understanding and will evaluate joining the newly formed group by the end of January. The companies aim to complete merger talks by June 2025, establish a holding company by August 2026, and list the shares of both companies on the stock exchange.

HONDA IS BUYING SHARES

Meanwhile, Honda announced that it will conduct a share buyback worth 1.1 trillion yen (7 billion dollars) next year. Honda's Chairman Toshihiro Mibe stated at a press conference regarding the matter that companies need a larger budget to compete in the development of new technologies in electric vehicles and autonomous driving. Mibe noted that the agreement aims to preserve the Honda and Nissan brands, share resources, and create synergy. He expressed that the two companies could reach a sales figure of 30 trillion yen (191.4 billion dollars) through a potential merger, with operating profit exceeding 3 trillion yen (19 billion dollars). Mibe stated, "Both companies will continue as subsidiaries that fully own the common holding company with their own brands."

THE NEW COMPANY WILL BE THE WORLD'S THIRD LARGEST AUTOMAKER

Japan's second and third largest automakers, Honda and Nissan, have been struggling to compete with American Tesla and Chinese electric vehicle manufacturers like BYD. Nissan, which has not been able to achieve the desired sales success in markets like China and the US, decided in November to lay off 9,000 employees and reduce production capacity. The new company to be established by the merger of Honda and Nissan will become the world's third-largest automaker in terms of vehicle production volume, after Toyota and Volkswagen.

THE LARGEST MERGER IN THE LAST 3 YEARS

The agreement will also be the largest merger in the industry since the 52 billion dollar merger between Fiat Chrysler and PSA that created Stellantis in 2021. Last year, Honda and Nissan sold 3.98 million and 3.37 million vehicles worldwide, respectively. Toyota maintained its first place for the fourth consecutive year by selling 11.23 million vehicles last year, while the Japanese manufacturer was followed by German Volkswagen with 9.24 million vehicles.

"EUROPE CANNOT COMPETE WITH CHINA"

In the studio of Haberler.com, Prof. Dr. İbrahim Güran Yumuşak, Dean of the Faculty of Business Administration at Istanbul Sabahattin Zaim University, who was a guest of the host Abdurrahman Yazıcı, stated that global automakers are struggling to find funds to cover the increasing costs of developing electric vehicles due to the massive resources required for expensive batteries and autonomous driving technology. He emphasized that European automotive companies are at a significant disadvantage against Chinese firms, stating, "Under the current conditions, it is not very possible for Europe to compete with China. Compared to Europe, China has a production and cost advantage."