Honda Motor Co., Ltd. HMC and Nissan Motor Co., Ltd. NSANY are considering forming a holding company and are expected to sign a memorandum of understanding soon, per Nikkei. While the automakers confirmed that they are in discussions, they provided no specifics about a potential deal or timeline. The exact structure of the proposed joint venture remains unclear.

The two companies are exploring various collaborative opportunities to leverage their respective strengths. They assured stakeholders that any significant updates would be shared at an appropriate time. Per CNN, Mitsubishi is also involved in these preliminary talks, potentially creating a three-way alliance among major Japanese automakers. Mitsubishi, however, declined to comment. Per Nikkei, a combined Honda-Nissan-Mitsubishi group could produce more than eight million vehicles annually. This will position the company as one of the largest global automakers, still behind Toyota (11.2 million in 2023) and Volkswagen (9.2 million in 2023).

Earlier this year, Honda and Nissan announced partnerships on electric vehicles (EVs) and battery technology. They could also benefit from further collaboration given recent challenges. Both companies have struggled in the Chinese market as local consumers increasingly favor domestic brands like BYD, which offer better value and more advanced EV technology at lower prices. Although both Nissan and Honda offer EVs and plug-in hybrids, they’ve struggled to compete effectively in this growing segment.

Nissan’s financial struggles have deepened. In November, it reported disappointing second-quarter results, cut its annual revenues and operating forecasts, and announced plans to reduce its workforce by 9,000 and scale back global production by 20% due to intense competition in key markets.

Meanwhile, Honda, which is significantly larger than Nissan, also faces hurdles. The company has pledged to sell only zero-emission vehicles in major markets by 2040, but its progress has been slow. Factors, such as low fuel prices, insufficient charging infrastructure and growing competition, have dampened EV demand in the United States and Europe. Both automakers also face potential disruptions from proposed tariffs by President-elect Donald Trump, which could necessitate major changes to their global supply chains.

HMC & NSANY’s Zacks Rank & Key Picks

Honda and Nissan currently carry a Zacks Rank #3 (Hold) each.

Some better-ranked stocks in the auto space are Dorman Products, Inc. DORM and Blue Bird Corporation BLBD, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for DORM’s 2024 sales and earnings suggests year-over-year growth of 3.66% and 51.98%, respectively. EPS estimates for 2024 and 2025 have improved 75 cents and 88 cents, respectively, in the past 60 days.

The Zacks Consensus Estimate for BLBD’s fiscal 2025 sales and earnings suggests year-over-year growth of 10.97% and 12.14%, respectively. EPS estimates for fiscal 2025 have improved 18 cents in the past 30 days.

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Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report

Nissan Motor Co. (NSANY) : Free Stock Analysis Report

Dorman Products, Inc. (DORM) : Free Stock Analysis Report

Blue Bird Corporation (BLBD) : Free Stock Analysis Report

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