Honda Shares Surge 16% Following $7 Billion Buyback Announcement

Honda’s shares soared over 16% on Tuesday after the company revealed plans for a massive share buyback worth up to ¥1.1 trillion ($7 billion). The announcement was made as Honda and Nissan disclosed plans to explore a merger aimed at advancing their electric vehicle (EV) and self-driving technology efforts.

The buyback will encompass 23.7% of Honda’s total issued shares to enhance the company’s capital structure. “We are starting with the largest share buyback we can execute at this moment while maintaining a strong financial base,” said Honda CEO Toshihiro Mibe during a press briefing.

Strategic Collaboration

The potential merger between Honda and Nissan, alongside Mitsubishi Motors—of which Nissan holds a majority stake—would create the world’s third-largest automaker. This partnership seeks to compete with dominant EV players like Tesla and Chinese firms such as BYD.

While Honda’s CEO emphasized that the buyback is not a bailout for Nissan, the latter is facing significant financial challenges, including a 93% plunge in first-half net profit and recent announcements of large-scale job cuts.

Industry Challenges

Foreign automakers, including Japanese brands, are struggling to maintain market share in China as local EV manufacturers lead the charge in the growing demand for environmentally friendly vehicles.

The three firms have signed a memorandum of understanding to explore the integration of their businesses under a new holding company, signaling a significant step toward strategic consolidation