Two of Japan’s biggest automakers, Honda and Nissan, have reportedly begun combination talks, according to a update in Japan’s monetary Nikkei Asia newspaper.

The two Japanese-headquartered automakers are looking to join forces as a way to contend in an ever-challenging industry increasingly concentrated on electric vehicles, the newspaper reported.

Both companies responded to a question about the update from USA TODAY with identical statements, which did not deny combination talks were underway.

“The content of the update is not something that has been announced by either companies,” the statements read. “As announced in March of this year, Honda and Nissan are exploring various possibilities for upcoming collaboration, leveraging each other’s strengths. If there are any updates, we will inform our stakeholders at the appropriate period.”

Honda and Nissan have recently increased ties to persist in an EV marketplace fueled by competition from Tesla and Chinese automakers – and stalling demand in the U.S. and Europe.

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The companies announced in August they were “deepening the framework of the strategic collaboration” agreed on in March 2024 to collaborate on research and advancement – and investments – in recent EVs and the software used by next-production vehicles.

“Going forward, Nissan and Honda will continue to study ways to make further synergies between the two companies and work toward the speedy implementation of specific measures,” the companies said.

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Honda and Nissan combination: ‘Positioning’ for the upcoming

The combination makes sense, according to Jessica Caldwell, head of insights for auto research and information business Edmunds.

“A combination would be a long-term way, not a answer to any short-term challenges either business is facing. Both Nissan and Honda are positioning themselves for the upcoming, which will be defined by electrification and autonomous technology – developments that are extremely costly,” Caldwell told USA TODAY.

With the upcoming turning to EVs and self-driving vehicles, “it’s logical that smaller automakers may require to collaborate to keep pace with larger players, including rising competition from Chinese manufacturers that have entered the trade aggressively,” Caldwell said.

The two companies may operate under a holding business, Nikkei reported, and are expected to sign a memorandum of understanding soon. A merged business could also eventually include Mitsubishi Motors, of which Nissan owns a 24% stake. Mitsubishi joined the Honda-Nissan initiative on EV and next-gen vehicle advancement in August.

Collectively, the business would have combined sales of about 8 million annually, making it the third-largest automaking business in the globe, Nikkei reported.

The combination would put the combined automaker in a better competitive position, according to Bloomberg. Honda, Nissan and Mitsubishi combined sold about 4 million vehicles worldwide in the first six months of 2024, behind the global chief, Toyota, which sold 5.2 million, Bloomberg said. The number two global automaker, Volkswagen, sold 4.35 million.

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The financing-intensive EV business requires billions of dollars in financing for recent factories and battery advancement, said K. Venkatesh Prasad, chief recent concept officer at the Center for Automotive Research in Ann Arbor, Michigan.

For legacy automakers such as Honda and Nissan, “it only makes sense to consolidate while you still can to make the volumes you require for expense to be kept low and to be able to design and construct additional expense content capabilities.”

Securing a profitable business in traditional vehicles using internal combustion engines “is a essential state to make way for the money needed to construct an EV business with a mid-to-long-term business sustainability schedule,” Prasad said.

Honda-Nissan combination could face Trump roadblocks

Other hurdles include the potential rollback of EV-amiable policies by U.S. President-elect Donald Trump and combination scrutiny from the Trump Administration.

The incoming president has vowed to receive a challenging line on imported vehicles, including 25% tariffs on vehicles shipped from Canada and Mexico. Both companies currently have plants in Mexico and Honda has a plant in Canada.

Trump could seek concessions from Honda and Nissan to approve any deal, auto industry officials said. During his first term, Trump threatened tariffs on Japanese vehicles.

Honda and Nissan also manufacture vehicles in the U.S. Honda has 12 manufacturing plants in the U.S., where it makes automobiles, power equipment and aircraft engines. Nissan, which has three plants in the U.S., announced 9,000 global layoffs last month and a 20% production cut.

Contributing: Hadley Hitson, USA TODAY Network, and Reuters.

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