Nissan and Honda Call Off Merger Talks, Shift Focus to EV Collaboration

In a significant shift for Japan’s auto sector, Nissan and Honda have officially ended merger discussions, shelving what could have been a $60 billion unification. Despite the halted talks, the two automakers affirmed their intention to deepen cooperation in electric vehicle (EV) technology—a sector where both companies face growing pressure from China’s fast-rising EV giants.

The boards of both companies approved the decision earlier this week, marking the end of months of speculation about a potential consolidation that might have created the world’s fourth-largest carmaker by volume, behind Toyota, Volkswagen, and Hyundai.

Strategic Differences Derail $60 Billion Merger Plan

According to sources close to the matter, the collapse of the merger discussions stemmed from fundamental disagreements over structure and control. One major sticking point was Honda’s proposal for Nissan to become a subsidiary—an idea that reportedly met resistance within Nissan’s leadership.

The merger talks, which surfaced late last year, also included Mitsubishi Motors as a junior partner. However, Mitsubishi was widely expected to withdraw from any formal consolidation, instead observing from the sidelines.

“While a merger could have brought scale, both companies ultimately prioritized operational autonomy and strategic flexibility,” said Masaki Yoshida, an independent automotive analyst based in Tokyo. “That may prove wise, given the turbulent shift the industry is undergoing.”

Doubling Down on EV Development Amid Global Pressure

Rather than pursuing a merger, Honda and Nissan have committed to a “strategic partnership aimed at the era of intelligence and electrified vehicles,” as outlined in a joint statement. The alliance will likely involve shared EV platforms, battery tech, and software development to remain competitive against global players like BYD and Tesla.

EV competition has intensified in recent years, particularly from Chinese automakers. BYD, for instance, overtook Tesla in global EV sales in late 2023, selling over 526,000 battery electric vehicles in Q4 alone.

In this context, Japanese automakers are racing to close the technology gap. While Honda plans to launch a lineup of next-generation EVs under its “0 Series,” Nissan is undergoing a sweeping restructuring to redirect resources toward electrification. That includes a 20% cut in global production capacity and the recent shutdown of its Changzhou plant in China.

Alliance Options Remain Open for Nissan

Though the merger has been shelved, Nissan appears to be actively exploring alternative partnerships. Industry insiders suggest the company is in talks with Taiwanese manufacturing giant Foxconn, which is reportedly interested in acquiring a stake in Nissan to bolster its EV supply chain ambitions.

This signals that Nissan is not retreating from collaboration altogether but instead shifting focus toward more targeted and flexible alliances. “The market is too dynamic for siloed strategies,” said Keiko Tanaka, a former executive at a major Japanese OEM. “Partnerships will define who leads in the next decade.”

Market Response and Long-Term Outlook

News of the merger talks had initially fueled investor enthusiasm, with Nissan’s share price surging by 60% and Honda’s by 26% in December. However, those gains have moderated—Nissan is now up 21% and Honda 11% from pre-rumor levels.

Nissan, still recovering from the reputational and financial fallout following former chairman Carlos Ghosn’s 2018 arrest, continues to trail Honda in market value. While both companies were roughly equal at 4.6 trillion yen a decade ago, Honda now commands a market capitalization of aro

und 7.5 trillion yen ($48.6 billion), nearly five times that of Nissan.

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