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The new company would be listed on the Tokyo Stock Exchange, with the merger planned to go into place in August 2026.
The firms have signed a separate MoU with Mitsubishi to explore that company joining the merger talks. Mitsubishi says that it will decide how it will proceed near the end of January 2025.
Nissan and Honda will form a special committee that will look at how best to integrate. One key area the firm is looking at is standardising vehicle platforms of both companies across various segments, which would reduce production complexity and cost and increase economies of scale.
The firm would also streamline their powertrain portfolio, although the new entity would continue to offer pure combustion, hybrid, plug-in hybrid and electric models.
Another key area of the merger would be increasing their shared research and development, particularly in areas such as software-defined vehicles, which will be key to future growth.
Honda and Nissan will also look to optimise their manufacturing plants and service facilities, and also to integrate their supply chain network and back-office operations.
The deal would have significant effects on the wider car industry. Nissan has been in a long-time alliance with French company Renault, with both firms set to produce EVs on shared platforms in the coming years.
In a statement, Renault Group said: “As the main shareholder of Nissan, Renault Group will consider its options based on the interest of the Group and its stakeholder.”
Renault Group said it would continue to roll-out projects already launched within the Alliance.
This isn’t the first time the two manufacturers have been linked to a merger: in 2020, the Financial Times reported that then Japanese prime minister Shinzo Abe had pushed the two firms into talks due to concerns over the deteriorating relationship between Nissan and Renault at the time. However, both companies were said to have rejected the plans.