Nissan's shares soar on news of potential tie-up with Honda

Nissan's share price soared almost 24% in Tokyo after reports citing unnamed sources said it might merge with Honda to form the world's third-largest car making group. That is the largest share-price jump for the company in the past 50 years, according to Bloomberg.

Conversely, Honda's share price fell by around 3%.

The reports said that Nissan alliance member Mitsubishi was included in the talks, and the idea pushed the car maker's shares up by almost 20% in its biggest rise since 2013.

All three Japanese car makers announced in August that they planned to share components for electric vehicles like batteries and jointly research software for autonomous driving to adapt better to dramatic changes in the auto industry centred around electrification. A preliminary agreement between Honda, Japan's second-largest automaker, and Nissan, third largest, was announced in March.

Trading in Nissan's shares was suspended but then resumed after the companies jointly issued a statement saying they were "considering various possibilities for future collaboration, but no decisions have been made".

How would a merger help the Japanese car makers?

A merger could result in a behemoth worth about $55bn (€52.4bn) based on the market capitalisation of all three automakers.

Joining forces would help the two companies gain larger scale to compete with Japan's market leader Toyota and with Germany's Volkswagen at a time when the ascent of Chinese car makers is shaking up the industry and manufacturers are struggling to shift from fossil fuel-driven vehicles to electrics.

Nissan has an alliance with Renault SA that is under review. Last month, it said it was slashing 9,000 jobs, or about 6% of its global work force, and reducing global production capacity by 20% after reporting a quarterly loss of 9.3 billion yen (€58.1m).

Earlier this month it reshuffled its management and its chief executive, Makoto Uchida, took a 50% pay cut to take responsibility for the financial woes.

He said Nissan needed to become more efficient and respond better to market tastes, rising costs and other global changes.

Honda reported its profits slipped nearly 20% in the first half of the April-March fiscal year from a year earlier, as sales suffered in China.

Toyota produced 11.5m vehicles in 2023, while Honda rolled out 4.2m and Nissan produced 3.4m. Mitsubishi Motors made just over 1m. Even after a merger Toyota would remain the biggest Japanese car maker.