Honda is exploring a potential merger with Nissan, a move that would create a $50 billion automotive company and represent one of the largest shake-ups in the industry since the formation of Stellantis in 2021. The Japanese automaker is seeking to stay competitive in the increasingly costly fight with China, which has emerged as a dominant player in the electric vehicle (EV) and autonomous driving space.

During a roundtable discussion with select media, Honda executives revealed that the company is interested in Nissan's large SUVs, such as the Armada and Pathfinder, for future hybrid models. Honda's hybrid technology is currently limited to its midsize vehicles like the CR-V and Accord, and the company sees Nissan's larger vehicles as an attractive opportunity to expand its offerings.

In addition to accessing Nissan's SUV lineup, Honda is also looking to reduce costs around future software-defined vehicles (SDV). Developing brand-new software, including advanced driving systems that move closer to autonomous vehicles and battery-electric vehicles, is both increasingly important for the longevity of established automakers and increasingly expensive. By sharing operations with Nissan, Honda hopes to mitigate these costs.

The potential merger is driven by Honda's concerns about China's rapid rise in the EV and autonomous driving space. According to a recent report by S&P Global Mobility, the global EV market is expected to grow nearly 30% year over year, with 89.6 million new EVs expected to be sold this year. The global autonomous vehicle market is projected to reach around $448.6 billion by 2035, up from $60.3 billion in 2025. If Japanese automakers want to maintain their dominance in the market, they must innovate quickly and get products into consumers' hands.

Honda's merger with Nissan would also provide access to underutilized factories, which could help the company meet customer demand. Honda's plants in the US are currently running at maximum capacity, and the company could use the excess capacity at Nissan's factories to produce more vehicles.

However, the potential merger is not without its risks. Former Nissan CEO Carlos Ghosn has expressed skepticism about the deal, calling it a "desperate move" and noting that the synergies between the two companies are difficult to find. Additionally, President-elect Donald Trump's threats to impose tariffs on foreign imports and eliminate federal subsidies for EVs could impact the merger's success.

In spite of these challenges, Honda remains committed to electrification. The company plans to release new EVs in the next year as part of its Zero series, and executives believe that EVs will be the solution for the future, regardless of the merger's outcome.

The potential merger between Honda and Nissan highlights the intense competition in the EV and autonomous driving space. As the industry continues to evolve, it's likely that we'll see more consolidation and partnerships between automakers as they seek to stay competitive and innovative.