Nissan and Honda have officially ended merger discussions that could have created a $60 billion auto giant, marking a major setback for Nissan as it grapples with financial struggles and intensifying competition from Chinese electric vehicle (EV) manufacturers.
The talks, initially revealed in December, were derailed by fundamental disagreements, including Honda’s proposal to make Nissan a subsidiary.
With the deal off the table, Nissan now faces mounting pressure to restructure and find new strategic partnerships to remain competitive in a rapidly evolving automotive landscape.
Nissan-Honda merger talks collapse over control disputes
Honda and Nissan, Japan’s second and third-largest automakers respectively, had been exploring a potential merger that would have created the world’s fourth-largest car company by vehicle sales, trailing only Toyota, Volkswagen, and Hyundai.
However, the discussions quickly became strained due to conflicting views on leadership structure and power distribution.
According to sources, Honda pushed for a merger framework that would have positioned Nissan as a subsidiary, a move that was deemed unacceptable by Nissan executives and its top shareholder, French automaker Renault.
Ultimately, the failure to agree on equitable terms led to the collapse of the deal.
Despite the fallout, both automakers have confirmed that they will continue their existing technology-sharing alliance, which also includes Mitsubishi Motors.
This collaboration remains crucial as legacy automakers seek ways to counter the rapid rise of Chinese EV makers such as BYD, which are aggressively expanding their market share with advanced, software-driven vehicles.
Nissan’s struggles deepen as earnings slump
The failed merger comes at a difficult time for Nissan, which has struggled to recover from a turbulent period of leadership changes and declining financial performance since the 2018 arrest of former chairman Carlos Ghosn.
On Thursday, Nissan slashed its full-year earnings forecast for the third time and reported another steep decline in third-quarter profits.
As part of its ongoing restructuring efforts, the company announced plans to close a manufacturing plant in Thailand by June, with two additional plant closures to follow.
Nissan had previously revealed intentions to cut 9,000 jobs and scale back global production capacity by 20% to stabilize its operations.
CEO Makoto Uchida acknowledged the urgency of the situation, stating that resolving Nissan’s financial struggles is the top priority.
He also suggested that once the company is on a clear recovery path, he would be open to stepping down as CEO.
“If I can see the direction in which this will take shape, I will naturally be ready to pass the baton to the next person,” Uchida said in a press conference.
Nissan is now actively exploring alternative partnerships
With the Honda merger off the table, Nissan is now actively exploring alternative partnerships to strengthen its position.
Industry insiders have speculated that Taiwan’s Foxconn, a major player in electronics manufacturing, could be a potential collaborator.
However, both companies have denied any formal talks at the management level.
At the same time, Nissan is reassessing its operations in China, where it operates eight factories through a joint venture with Dongfeng Motor.
In an attempt to optimize resources, the company has already suspended production at its Changzhou plant and may need to further reduce capacity in the region.
Growing challenges that traditional automakers face
When merger talks were first reported on December 17, Nissan’s stock surged over 60%, while Honda saw gains of around 26%.
However, as doubts grew over the deal’s viability, both stocks pared their gains, with Nissan now up 21% and Honda up 11% since the initial announcement.
The failed merger underscores the growing challenges traditional automakers face in a fast-changing industry.
With Chinese automakers dominating the EV sector and geopolitical factors—such as potential US tariffs on vehicles imported from Mexico—posing additional risks, Nissan and Honda must navigate an increasingly complex global market.
For Nissan, the priority now is executing its turnaround strategy and securing new alliances that will help it stay competitive in a future dominated by electric and autonomous vehicles.
The company is expected to provide an update on its restructuring efforts within the next month.
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