Automotive
In a major shakeup for the Japanese automotive industry, Nissan has decided to walk away from merger talks with Honda, according to sources familiar with the matter. The proposed $60 billion-plus tie-up would have created the world’s third-largest automaker, giving both companies greater leverage in an industry facing increasing competition from Chinese EV makers like BYD. However, growing differences between the two manufacturers—particularly concerns over control—ultimately led to the breakdown of negotiations.
A Merger That Wasn’t Meant to Be
The initial discussions, which were revealed in December 2023, suggested a partnership that would strengthen both brands in the rapidly evolving automotive landscape. However, one major sticking point emerged: Honda reportedly proposed that Nissan become a subsidiary rather than a merger of equals. This was a significant departure from earlier discussions and a move that Nissan ultimately rejected.
On Wednesday, Nissan’s board formally decided to call off the negotiations, marking the end of what could have been a game-changing deal. The announcement had immediate financial consequences—Nissan’s shares slid over 4% on the Tokyo Stock Exchange before trading was temporarily halted, while Honda’s stock surged more than 8%, suggesting investor relief that the automaker wouldn’t be taking on its troubled rival.
Nissan’s Struggles Continue
This development raises serious questions about Nissan’s ability to turn things around on its own. The automaker has been struggling since the 2018 arrest and subsequent removal of former chairman Carlos Ghosn, which triggered years of instability. Nissan has since launched an aggressive restructuring plan that includes cutting 9,000 jobs and reducing global production capacity by 20%.
However, these measures may not be enough. Unlike Honda and Toyota, Nissan faces greater exposure to potential U.S.-Mexico tariffs, adding another layer of uncertainty. Additionally, the company has lagged behind in the electric vehicle (EV) race. While it was once an EV pioneer with the Nissan Leaf, competitors have since overtaken it with more advanced and appealing models.
Why Honda Walked Away
From Honda’s perspective, concerns about Nissan’s slow recovery played a significant role in its decision to push for control rather than a partnership of equals. With a market value of approximately 7.92 trillion yen ($51.90 billion), Honda is more than five times larger than Nissan, which stands at just 1.44 trillion yen. Given these numbers, Honda may have felt that taking full control of Nissan was the only viable option.
When Nissan refused to become a subsidiary, Honda ultimately decided to step back. “Without being able to have control, Honda appears to be walking away,” said Christopher Richter, Japan autos analyst at CLSA.
What’s Next for Nissan?
The failed merger means Nissan will have to navigate its recovery alone, without the added support that a partnership with Honda could have provided. Its alliance with Renault remains intact, and the French automaker had expressed openness to the Honda merger. However, it’s unclear whether Renault will step in to offer further assistance.
The road ahead for Nissan remains uncertain. While it still has strong global recognition and an established presence in key markets, its ability to innovate, cut costs, and regain consumer confidence will be critical to its long-term survival. With the automotive industry rapidly shifting toward EVs and new technologies, Nissan needs a solid game plan—or risk being left behind.
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