Honda and Nissan End Merger Talks

Japanese automakers Honda and Nissan have officially called off their merger discussions, ending a potential deal that would have created the world’s third-largest carmaker, valued at $60 billion. The companies announced on Thursday that they had “agreed to terminate the MOU (memorandum of understanding) signed on December 23 last year for consideration of a business integration between the two companies.”

The talks, which began in December, were seen as a strategic move to help both companies compete against rising Chinese electric vehicle (EV) manufacturers such as BYD. However, negotiations quickly hit roadblocks, with Honda proposing that Nissan become a subsidiary rather than an equal partner in the deal. This shift reportedly played a key role in Nissan’s decision to back out.

Despite the failed merger, Honda and Nissan have committed to continuing their collaboration on electric and intelligent vehicle development. "Going forward, Nissan and Honda will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles," their joint statement read.

For Nissan, the collapse of the merger talks comes at a particularly difficult time. The company has been struggling financially, with profits plunging 94% in the six months ending in September. The company has already announced plans to cut manufacturing output by 20% and lay off 9,000 workers. Analysts have warned that Nissan could face bankruptcy as soon as 2026 if it fails to secure a strong partner.

The failed deal also reflects ongoing leadership challenges at Nissan. The company has yet to fully recover from the 2018 scandal involving its former CEO Carlos Ghosn, who was arrested on financial misconduct charges before fleeing Japan. This has left Nissan in search of stability, a goal the merger was supposed to support.

Honda, on the other hand, entered negotiations from a position of strength. The company has consistently outperformed Nissan in global car sales and remains a more stable brand. Some analysts suggested Honda was reluctant to take on the financial burden of supporting Nissan’s recovery. Jesper Koll of Monex Group commented, “You're taking a potentially great company and taxing it with having to bail out an ugly duckling.”

With the merger off the table, Nissan is now looking for new partnerships. Taiwan’s Foxconn, best known as Apple’s main supplier, has already expressed interest in working with the automaker. Foxconn chairman Young Liu confirmed on Wednesday that the company is considering buying Nissan shares, though he emphasized that its main goal is cooperation, not acquisition.

Nissan also remains linked to Renault, which holds a 36% stake in the company. However, Renault was quick to dismiss the terms of the proposed Honda-Nissan deal as "unacceptable." This suggests that Nissan may not be able to rely on its long-time French partner for additional support.

The broader auto industry continues to face challenges from the rapid shift to EVs and increasing competition from China. Honda CEO Toshihiro Mibe warned last year, “We must build up capabilities to fight them, including the current emerging forces, by 2030. Otherwise, we will be beaten.”

While Honda and Nissan will continue working together on electric vehicles, the end of merger talks leaves Nissan in a precarious position. Whether it finds a new partner or manages to recover independently remains to be seen.