Honda and Nissan, once rivals, are talking about merging — and Nissan investors are thrilled

Honda and Nissan are negotiating a possible merger.

Nissan’s stock surged after reports it was negotiating a possible merger with Honda so they could better compete against Tesla and Chinese electric vehicle makers.

Japanese newspaper Nikkei reported the possible merger on Tuesday, saying the companies hoped to become more competitive in the EV space.

The companies are in talks to set up an umbrella holding company to facilitate a merger, Reuters reported on Tuesday, citing a person with knowledge of the discussions.

Nissan’s shares were nearly 24% higher when local markets closed on Wednesday. Honda investors seemed less thrilled, with the company’s shares closing 3% lower.

“As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths,” a Honda spokesperson said in a statement to B-17 on Tuesday.

“We will inform our stakeholders of any updates at an appropriate time,” the statement added.

The merger could also include another automaker: Mitsubishi Motors, Bloomberg reported on Tuesday, citing people familiar with the matter. Nissan is Mitsubishi’s largest shareholder.

“The contents of the report is not something that has been announced by our company. Nothing has been decided at the moment,” Mitsubishi said in a statement to B-17.

On Wednesday, Bloomberg reported that the parent company of Taiwanese tech giant Foxconn had approached Nissan to take a controlling stake in the automaker.

Representatives for Nissan and Foxconn did not respond to requests for comment from B-17.

The uptick in Nissan’s stock follows a particularly difficult year for the car company. Amid falling profits and decreased sales, Nissan slashed its workforce by 9,000 jobs globally in November in an effort to reduce costs. Nissan’s shares are down nearly 25% this year. Honda’s stock is down by over 15% this year.

Nissan fell behind China

Like Toyota and Honda, Nissan has come under pressure from Chinese EV makers.

The likes of BYD have rapidly taken market share in China and are now taking on their Japanese rivals in key developing markets such as Southeast Asia with a lineup of affordable and high-tech EVs and hybrids.

Andy Palmer, who developed the first mass-market EV at Nissan before leaving the company in 2014 as COO, told B-17 in November that the company had “shot itself in the foot” by not aggressively pursuing new electric models and had squandered a 10-year lead on EV tech.

“Nissan finds itself now with a very poor lineup of products and without obvious leadership in EVs, and that’s the direct result of poor management,” he said.

The potential consolidation comes after Honda and Nissan agreed to collaborate on EV batteries and software earlier this year.

During Nissan’s November earnings call, CEO Makoto Uchida acknowledged that the company had fallen behind and said the automaker needed to strengthen its competitiveness.

“There are limits if we are to do that alone. So, that had triggered us to engage in partnership with Honda,” Uchida said.