Al Root

Nissan shares jumped Tuesday after a report it was considering merging with Honda. The report was speculative, but changes are coming to the auto industry.

Nissan's U.S.-listed American depositary receipts were up 11.6% in midday trading at $5.11, while the S&P 500 and Dow Jones Industrial Average were down 0.4% and 0.8%, respectively. Honda shares added 1.4%.

The jump came as Nikkei Asia reported the two auto makers have begun merger talks.

Both Honda and Nissan told Barron's the information in the article didn't come from them.

The idea of a merger, however, doesn't come out of thin air. In March, the pair announced they started a "feasibility study or strategic partnership."

The reason for a partnership or merger isn't hard to figure. The auto industry is getting more complicated with gasoline, hybrid, and all-electric vehicles demanding billions in investment capital. Size and scale matter.

"It is important to prepare for the increasing pace of transformation in mobility in the mid-to-long-term," said Nissan CEO Makoto Uchida in March.

Honda sold about 1.7 million cars in the first half of its 2025 fiscal year. Nissan sold about 1.6 million. Volumes declined year over year and operating profit fell amid heightened price competition -- especially in China.

Toyota sold about 5.4 million cars. Its volume and operating profit fell year over year as well.

Things aren't going to get any easier as China sells more EVs, leaving auto makers with too much capacity to make unneeded gasoline-powered cars.

It is why Nissan and Honda are looking for solutions before things get any more difficult.

Through midday trading, Nissan stock was down about 39% year to date. The company's market value was about $8 billion. Honda shares were down about 18% and its market value is about $40 billion.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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December 17, 2024 14:10 ET (19:10 GMT)

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