Nissan Motor and Honda Motor announced on Monday they have formally agreed to begin discussions on a merger, with both boards approving a basic agreement.

Mitsubishi Motors has also signed a basic agreement to explore participating in the integration, with a decision on its involvement expected by the end of January 2025, said Honda Motor CEO Toshihiro Mibe at a news conference.

Nissan and Honda aim to finalize the formal agreement by June 2025. The merger, if realized, will establish a joint holding company via a stock transfer, making Nissan and Honda wholly-owned subsidiaries while retaining their brand identities. The holding company is expected to be listed on the Tokyo Stock Exchange's Prime Market by August 2026, Mibe said.

He highlighted the potential to transform the companies into a global leader with annual sales exceeding 30 trillion yen ($191 billion) and operating profits surpassing 3 trillion yen. "Amid rapid global changes in the automotive industry, we see immense synergy potential that exceeds our expectations," Mibe said.

Makoto Uchida, Nissan Motor CEO, said: "We have decided to take a significant step toward the future, moving beyond collaboration to begin discussions on a management integration."

He emphasized that the combined annual vehicle production of Nissan and Honda totaled 7.5 million units. If realized, the integration would create the world's third-largest automobile group by sales, according to Nikkei.

Uchida emphasized the rapidly changing automotive landscape, saying, "In this era, even large companies cannot secure their future if they cling to conventional wisdom, delay decisions, or resist change."

To advance vehicle electrification and intelligentization, Uchida stressed the need for significant investments. He noted that the emergence of new players has intensified competition.

Nissan and Honda began exploring collaboration in March, evolving into a formal partnership in August.

Takao Kato, CEO of Mitsubishi Motors, highlighted the challenges facing the automotive industry during its transformation, emphasizing the demand for advanced technologies in electrification and intelligentization.

"Securing the necessary investments and resources is beyond the reach of any single company. Collaboration with Nissan and Honda is crucial for our future competitiveness," Kato said.

Masakazu Tokura, chairman of the Japan Business Federation, expressed his support for the discussions on management integration between Honda and Nissan at another news conference on Monday. He noted the critical role of the automotive industry as a driver of Japan's economy.