What the Honda-Nissan merger means and how it could affect the Detroit Three

The plan announced Monday by Japanese automakers Honda and Nissan to merge by 2026 highlights how the rise of Chinese automakers like BYD is pressuring the industry to look for potential cost savings and greater scale, auto industry analysts told the Free Press.

They suggested that consumers could ultimately benefit, but that the impact on the Detroit Three will take time to unfold.

They also pointed to the last major merger in the industry: the creation of Stellantis in 2021, to show that it is difficult to successfully pull off such ventures. Stellantis, owner of Jeep, Ram, Chrysler, Dodge and Fiat, has particularly struggled this year, even saying goodbye to CEO Carlos Tavares amid disputes with key stakeholders, declining sales and excess inventory.

A completed Honda-Nissan merger would create the third-largest global automaker, with the news coming as tariff threats from the new Trump administration add more uncertainty to the industry landscape.

The plans, announced in Tokyo on Monday, aim to form a holding company with Honda, the larger of the two, and select the majority of board members, according to Reuters, which noted that Mitsubishi was also considering joining and that the merged group would mean global annual sales of more than 8 million vehicles.

The merger is likely to increase cost pressure on US automakers

Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, said he doesn’t expect any changes to the Detroit Three in the near term.

“Nissan’s goal is to reduce parts and engineering costs by leveraging the volume of another manufacturer like Honda. To regain some of its lost market share, Nissan would need years to build new products and find new buyers to fill its existing plants, he said. “Honda could add new segments, particularly body-on-frame pickups and SUVs, which are Nissan’s strengths. If Honda were to acquire a midsize pickup or large SUV, Ford, GM and Stellantis could face competition in their most profitable segments.”

He said the bigger problem for the Detroit Three is the price factor, which is driven by exports from China.

“Part of the collaboration between Honda and Nissan is to reduce costs as the new players from China have a price advantage. “Tariffs can only hold back competition for a short time before they become a crutch that supports the entire industry,” Fiorani said.

Erik Gordon, a professor at the University of Michigan’s Ross School of Business who studies the automotive industry, predicted that “the Detroit Three will face a stronger competitor that will be able to spread development costs across more vehicles and “To invest more in next-generation technologies.” He added: “American consumers will be better off than if Nissan shrinks or disappears.”

However, the impact on consumers will be difficult to assess for some time.

Stephanie Brinley, deputy director at S&P Global Mobility, said it was “far too early to know the direct impact on consumers compared to brands in the U.S.”

She noted that Honda and Nissan’s offerings overlap in most segments, so they would compete with themselves and, due to the nature of antitrust and securities laws, would remain competitors until a merger is completed.

How a merger could reduce Detroit Three’s market share

Brinley pointed to another competitor to show how the relationship might be handled in the United States.

“Hyundai and Kia are both part of the Hyundai Motor Group but operate completely independently for most operations in the U.S., while both brands’ products benefit from an intelligent platform, early product development and shared components. “These two brands have carved out enough space for themselves in the market, even though they compete in many of the same segments,” she said, pointing out that a merged company that creates a stronger competitor will ultimately result in a smaller market share for companies like Ford, GM and Stellantis could lead.

Of note are the vehicles and technology where Honda and Nissan would benefit most from a merger.

Ivan Drury, director of insights at Edmunds, said a Honda-Nissan merger could pose a serious challenge to the Detroit Three in this context.

“Honda would gain access to segments it has not traditionally pursued as aggressively, while Nissan would leverage Honda’s hybrid technology to expand its offering. However, their contrasting sales strategies — Honda’s avoidance of fleet sales and discounts compared to Nissan’s heavy reliance on them — “could cause friction,” Drury said. “If executed well, the merger could strengthen both automakers’ offerings in the SUV, luxury and compact crossover categories. …And if talks of re-entering the cheaper small and medium sedan markets ever materialize, then these two models have that range covered, which have been in production for decades and span the range between shopping cart and hot hatchback.”

Still, Drury noted that “despite potential synergies in filling gaps in each other’s lineups, legacy issues could hamper collaboration and limit the success of the merger.”

Morningstar auto analyst David Whiston pointed to potential impacts of a Honda-Nissan merger on Detroit Three members, but not in the short term.

“It likely won’t mean a change in strategy for the Detroit Three any time soon, if at all, as it is uncertain how a combination of Honda and Nissan will work. As you know, not all autofusions go well. Stellantis is already the byproduct of a huge acquisition,” he said. “If the Honda/Nissan deal was wildly successful (and that’s a big if given their overlap), then GM and Ford will become more isolated in terms of size.”

“Like two weak swimmers helping each other”

However, Whiston noted that partnerships are already underway.

“GM is doing well on its own at the moment and is already pursuing its own cost-sharing alliance with Hyundai. “Ford has worked with Volkswagen on some things in the past,” he said.

This GM-Hyundai deal, as the Free Press reported in September, could include the joint development and production of passenger and commercial vehicles as well as the procurement of battery raw materials.

David Kudla, CEO of Mainstay Capital Management, pointed to China’s rise “from a near-unknown country a few decades ago to a dominant position in global automotive market share” and said he expects this kind of impact to continue.

“Their ability to produce low-cost vehicles continues to put pressure on other automakers. Against this backdrop, the global automotive industry is consolidating and we will see more such team-ups, both strategically and out of necessity,” he said, citing Nissan’s sales difficulties in particular.

“Given the large overlap between these Japanese companies and the problems associated with them, this merger is like two weak swimmers helping each other swim across the English Channel,” Kudla said. “But it could help both companies if they can realize more economies of scale and perhaps some synergies as many automakers struggle to survive against the onslaught of China in an increasingly competitive global market.”

Karl Brauer, senior analyst at iSeeCars.com, said if Honda and Nissan could effectively share their resources, it would provide the scale needed to compete.

“In the US, we can expect consolidation across vehicle platforms, powertrains and even dealers to reduce costs. But while a merger always makes sense on paper, in practice it’s never easy to make it work. It will be years before we know whether this project was successful,” he said.

And according to Erin Keating, a senior analyst at Cox Automotive, the average consumer in Middle America is unlikely to notice any impact from a merger for the foreseeable future.

“Frankly, I suspect a large portion of the population doesn’t even know that Nissan is the parent company of Infiniti or that Acura is part of Honda,” she said.

Impact on Tennessee

Nissan’s North American headquarters is in Nashville. Don Bruce, an economist at the Boyd Center at the University of Tennessee, told The Tennesseean newspaper in Nashville last week that he sees potential in the event of a merger.

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What the Honda-Nissan merger means and how it could affect the Detroit Three

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