Two major automakers are in talks to merge to compete as the largest makers of electric vehicles

Japanese automakers Honda and Nissan are in talks about a possible merger to help them survive the slowing electric car market as they continue to battle Chinese manufacturers such as BYD, Geely and SAIC and US EV major Tesla.

Nikkei reported Tuesday that the merger would likely involve Mitsubishi Motors, of which Nissan is a 24 percent stakeholder.

The Japanese automakers are said to be considering operating under a holding company and will sign a memorandum to that effect, but talks are at an early stage and neither company has confirmed a deal has taken place.

The two companies are expected to confirm the talks next week, Japanese TV channel TBS reported.

Nissan – Japan’s second-largest automaker, with Honda in third place – is struggling to find ways to pay down its estimated $5.6 billion debt burden.

In early December, reports suggested Nissan was on the brink of collapse and had “12 to 14 months to survive” as it could not keep up with cheap Chinese imports of electric vehicles.

In March, Honda and Nissan agreed to a strategic EV partnership, which expanded to include batteries and technology in August.

However, the latest merger would be a stronger resource-sharing arrangement, benefiting both companies against cheaper rivals.

While the union would raise questions about British jobs – Nissan has 7,000 workers in Britain – the union would see a combined value of £41 billion combined.

Since the merger reports came to light, Nissan’s shares have risen 23.7 percent – the company’s best day since 1985 – and Mitsubishi’s have also risen 20 percent. Honda shares fell three percent.

A Nissan spokesperson told This is Money: ‘The content of the reports that Honda, Nissan and MMC are considering a business integration are not based on an announcement from our company.

‘As announced in March and August this year, Nissan, Honda and MMC are considering various options for future cooperation, including the contents of the report, but no decisions have yet been made.

“If there are any updates, we will inform all stakeholders at the appropriate time.”

Nissan, which has a huge factory in Sunderland, the largest car manufacturing plant in Britain, has had a difficult year.

The company’s global sales fell 3.8 percent to 1.59 million vehicles in the first half of the current financial year, largely due to a 14.3 percent decline in China and a drop in demand in the US – the two largest markets.

Then in December the announcement was made that Nissan would cut 9,000 jobs worldwide – and 20 percent of its production capacity, to cut costs by £2 billion.

The company risks accumulating its largest ever debt by 2026, with potential debt of as much as $5.6 billion, it has been suggested.

“The source of the problems stems from a wave of cheaper EV alternatives from China that are flooding the global market and taking market share away from the Japanese company,” Forbes said.

CEO Makoto Uchida said earlier this month: “This is a lesson we have learned and we have failed to move with the times.

“We could not have anticipated that hybrid electric vehicles and plug-in hybrids would be so popular.”

While Nissan is struggling, its rivals are enjoying an increasingly strong position in the EV market.

BYD and Tesla have seen a surge in sales with combined global sales of 7.4 million vehicles by 2023. In November, China alone accounted for 70 percent of global electric vehicle sales.

BYD’s revenue for the three months ended September 30 was $28.2 billion, while Tesla’s revenue was $25.2 billion in the same period, Bloomberg reports.

The other party involved in the deal is French car giant Renault, which owns a 35.8 percent stake in Nissan.

Renault reportedly wanted to reduce its stake in Nissan after its recent performance and this merger could provide an ‘exit route’.

A Jeffries stock analysis shows: ‘According to our estimates, in a merger without premiums, at last night’s closing prices, Honda shareholders would hold ~84 percent of the combined share capital, compared to Renault’s 35.8 percent stake ( 2.78 billion euros) would be diluted. to an interest of 5.8 percent (2.8 percent for the core interest of 17.1 percent and 3 percent for the shares held for sale).’

In response to the reports, Honda noted: “The information contained in the report accessed on December 17 was not provided by our company. As announced in March this year, Honda and Nissan are exploring various opportunities for future cooperation, leveraging each other’s strengths.

“We will inform our stakeholders of any updates in due course.”