MOU signed Collaborative Considerations by Nissan, Honda, and Mitsubishi Motors.

MOU means that these companies have signed a "Memorandum of Understanding" to explore the participation, involvement and synergy sharing in relation to the business integration through a joint holding company.

Back in August 1st, 2024 Nissan and Honda created a Joint Holding Company for the commencement of a strategic partnership focused on intelligence and electrification. This was to start the consideration towards integration of the two companies. Mitsubishi Motors has now signed onto this MOU to explore the possibility of achieving synergies at an increased level through business participation or integration.

In basic terms, the three companies have agreed to join forces in sharing costs to move forward with EV platform R&D while they also look at the ICE "Internal Combustion Engine" gas side of having shared platforms to reduce costs and hopefully save the three auto companies by keeping them alive. 

While Nissan and Honda have agreed to move forward in this integration of the two auto companies, Mitsubishi Motors will make a final decision by the end of January 2025 about possibly joining in with the integration of Mitsubishi Motors into this joint 3 auto company venture.

Nissan and Honda have already agreed to a full SDV or Software-defined vehicles program moving forward that will allow them to have a solid crucial collaboration of intelligence and electrification for future products. Both companies have stated that the acceleration of technology and the rapid change of the auto industry will allow these two companies to maintain global competitiveness and deliver more attractive products and services for customers worldwide. Nissan global mobility product line merged with Honda four-wheel-vehicles, motor cycles and power products can allow both companies to become more attractive to shareholders and innovation of products to sell to customers worldwide according to the CEOs of both companies.

Nissan and Honda have stated the following:

Nissan and Honda aim to become a world-class mobility company with sales revenue exceeding 30 trillion yen ($190 Billion U.S. Dollars) and operating profit of more than 3 trillion yen ($19 billion U.S. Dollars).

The expected synergies from the business integration at this time are:

1. Scale advantages by standardizing vehicle platforms

• By standardizing the vehicle platforms of both companies across various product segments, the companies expect to create stronger products, reduce costs, enhance development efficiencies, and improve investment efficiencies through standardized production processes.
• The integration is projected to increase sales and operational volumes, allowing the companies to reduce development costs per vehicle, including for future digital services, while maximizing profits.
• By accelerating the mutual complementation of their global vehicle offerings - including ICE, HEV, PHEV, and EV models - Nissan and Honda will be better positioned to meet diverse customer needs around the world and deliver optimal products, leading to improved customer satisfaction.

2. Enhancement of development capabilities and cost synergies through the integration of R&D functions

• In accordance with the MOU to deepen strategic partnership and the joint research agreement on fundamental technologies dated August 1, the two companies have started joint research in fundamental technologies in the area of vehicle platforms for next-generation software-defined vehicles (SDVs), which is the cornerstone of the field of intelligence. After the business integration, both companies will encompass more integrated collaboration across all R&D functions, including fundamental research and vehicle application technology research. This approach is expected to enable both companies to efficiently and swiftly enhance their technological expertise, achieving both improvements in development capabilities and reductions in development costs through the integration of overlapping functions.
   

3. Optimizing manufacturing systems and facilities

• The companies anticipate that optimizing their manufacturing plants and energy service facilities, combined with improved collaboration through the shared use of production lines, will result in a substantial improvement in capacity utilization leading to a decrease in fixed costs.
   

4. Strengthening competitive advantages across the supply chain through the integration of purchasing functions

• To fully leverage the synergies from optimizing development and production capacity, both companies intend to boost their competitiveness by improving and streamlining purchasing operations and source common parts from the same the supply chain and in collaboration with business partners.
   

5. Realizing cost synergies through operational efficiency improvements

• The companies expect that the integration of systems and back-office operations, along with the upgrade and standardization of operational processes, will drive significant cost reductions.
   

6. Acquisition of scale advantages through integration in sales finance functions

• By integrating relevant areas of sales finance functions of both companies and expanding the scale of operations, the companies aim to provide a range of mobility solutions, including new financial services throughout the vehicle lifecycle, to customers of both organizations.
   

7. Establishment of a talent foundation for intelligence and electrification

• The human resources of the companies are an invaluable asset, and establishing a strong human resource foundation is crucial for the transformation that will come with the business integration. After the integration, increased employee exchanges and technical collaboration between the companies are expected to promote further skill development. Moreover, by leveraging each company's access to talent markets, attracting exceptional talent will become more attainable.

Method of business integration and stock listing
Nissan and Honda, with the result of the consideration, plan to establish, through a joint share transfer, a joint holding company that will be the parent company of both companies. This will be subject to approval at each company's general meeting of shareholders and obtaining necessary approvals from relevant authorities for this business integration, based on the premise that Nissan's turnaround*1 actions are steadily executed. Both Nissan and Honda will be fully owned subsidiaries of the joint holding company*2.

Additionally, the companies plan to continue coexisting and developing the brands held by Honda and Nissan equally.

• Shares of the newly established joint holding company under consideration are planned to be newly listed (technical listing) on the Prime Market of the Tokyo Stock Exchange (“TSE”). The listing is scheduled for August 2026.
• With the listing of the joint holding company, both Nissan and Honda will become wholly owned subsidiaries of the joint holding company and will be scheduled to be delisted from the TSE. However, shareholders of both companies will continue to be able to trade shares of the joint holding company issued during this share transfer on the TSE.
• The listing date of the joint holding company and the delisting date of both Nissan and Honda will be determined in accordance with the regulations of the TSE.
• Regarding the organizational structure of the joint holding company, and both companies which will become wholly-owned subsidiaries of the joint holding company after the business integration, the optimal structure for realizing synergies, including the integration of R&D functions, purchasing functions, and manufacturing functions, will be discussed and considered within the integration preparatory committee, with the aim of establishing an organizational structure that enables efficient and highly competitive business operations after the business integration.

The CEO's of all three companies had the following to say:

Upon looking at the press releases, it makes total sense that these companies would look to merge as each company is having a challanging time.

Nissan globally has seen a 33.7% reduction in sales taking the estimated 2024 market share to 5.2%. 

Honda globally has seen a 9% reduction over all with a 32% reduction in the asian rim leaving them with a 2024 estimated 5.4% market share.

Mitsubishi Motors globally has seen a reduction year over year of a 10.7% drop leaving them with a 2024 estimated market share of 4.6%.

All three auto companies lag the industry in technology connected auto's, feature / functions and especially EVs. All three companies have seen their profits turn into negative earnings for their respective companies leaving them with no real ability to perform R&D in building EVs to compete in China or the U.S. let alone Europe that has mandates in place for the end of ICE by 2035.

End result is it looks like for these companies to survive, merging into one company that shares platforms and technology especially in the software and battery sectors will be the only way to move forward.