Two Japanese carmakers, Nissan (NSANF) and Honda (NYSE:HMC), are discussing the possibility of a merger, forming a holding company to create the world's third-largest automaker by sales volume.

Honda globally sold 3.98 million automobiles in 2023 while Nissan sold 3.37 million automobiles in the same year. The combined sales of the two totaled 7.35 million vehicles last year, making them the third-largest automaker by the number of vehicles sold, trailing behind Toyota and Volkswagen and surpassing Hyundai and its affiliate Kia, which sold 7.31 million vehicles.

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Even though discussions are ongoing, no final decision has been made yet. But the market is already excited, lifted Nissan up 16.94% on Wednesday, December 18, 2024. But Honda experiences steady with a slight decrease of 1.41%.

Taiwan's electronics giant Foxconn, which assembles Apple's iPhones, has shown its interest to acquire a controlling stake in Nissan. This comes as Nissan gears up to merge with Honda. It was said that Foxconn's approaching towards Nissan has escalated the excitement of the merger talk between Honda and Nissan since there are concerns Nissan could possibly be vulnerable if Foxconn takeover.

Nissan and Honda have their biggest market in North America, the region represents 37% of the sales followed by China, Japan and Europe, and the rest of the world.

With Honda's market capitalization of $44 billion and $10 billion of Nissan's, the new merged holding company will be even larger in terms of market capitalization than the Stellantis that came from the Fiat Chrysler and PSA merger in 2021 that worthed $52 billion in market capitalization.

The goal of this merger is to create a larger entity in electric vehicle sector and therefore, could help Japan raise its performance in electric vehicles market to compete with the US led by Tesla and China's BYD.