Soaring costs could diminish the number of major Japanese car makers to just three or four players by 2021, according to automotive research firm Kelley Blue Book.
The world's third-largest economy is also the world's third-largest vehicle producer, boasting at least eight leading brands, including the world's biggest-selling automaker Toyota Motor. Other major car producing countries, such as Germany and the U.S., only have a handful in comparison.
But the industry, once a shining example of the country's economic heft, has had a dismal run of late. Profits at Toyota have slumped while Mitsubishi Motors has been ensnared in a fuel-economy scandal. Even suppliers haven't been spared: Airbag maker Takata reported its third net loss in the past four years on Thursday following a massive recall.
"I think we could see consolidation over the next five years down to three to four major players as opposed to so many smaller players that we have right now....You can lose a third to even half of them within the next 5-10 years," Karl Brauer, senior director of automotive industry insights at Kelley Blue Book told CNBC's Asia Squawk Box.
Nissan could pay as much as $1.85 billion for a one-third stake in Mitsubishi, making it the latter's biggest single shareholder, Reuters reported. Last month, Mitsubishi confessed that it manipulated test data to overstate the fuel efficiency of 625,000 cars, including 468,000 Nissan vehicles.