Honda and Nissan announce plans to merge after the Japanese car giants struggle to match rivals in electric vehicles

Japanese car giants, Honda and Nissan, have announced plans to merge.

That would make them the third largest car maker by sales, behind Toyota Motor Corp and Volkswagen AG.

The two companies said they had signed a memorandum of understanding, which would also include the smaller Nissan Alliance member, Mitsubishi Motors, in the talks on integration.

Japan's car makers have struggled to match their big rivals in electric vehicles (EVs) and are trying to cut costs.

If the merger is finalised it could result in a company worth more than 50 billion dollars (£39.77bn) based on the market capitalisation of all three car makers.

Honda would initially lead the new management, which would retain the principles and brands of each company, Honda's president, Toshihiro Mibe, said.

The aim is for the deal to be completed by August 2026, he added, but said there was a chance it would not go forward.

Mr Mibe said there are "points that need to be studied and discussed" about the merger. "Frankly speaking, the possibility of this not being implemented is not zero."

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Despite the prospective deal making the new company a giant in the industry, it would still lag behind Toyota as the leading Japanese automaker.

Toyota rolled out 11.5 million vehicles in 2023, with Honda, Nissan and Mitsubishi Motors combining for around eight million.

It comes after the three companies announced in August that they would share components for EVs like batteries and jointly research software for autonomous driving.

Nissan has struggled under the weight of a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets - allegations that he denies. He eventually was released on bail and fled to Lebanon.

He said the planned merger was a "desperate move".

Meanwhile, in Europe, car companies have been cutting jobs and shutting factories as they face pressure from growing exports from China, Sky News' economics and data editor Ed Conway reported this month.

(c) Sky News 2024: Honda and Nissan announce plans to merge after the Japanese car giants st