Nissan-Honda merger talks near collapse as control dispute stalls billion-dollar deal

Nissan, Japan’s third-largest automaker, is reportedly preparing to end merger discussions with Honda, the country’s second-largest car manufacturer, according to the Nikkei newspaper. The proposed merger, which aimed to create the world’s third-largest automaker by sales, has encountered significant obstacles, raising concerns about Nissan’s independent turnaround strategy.

Following the report, Nissan’s stock dropped over 4%, prompting a temporary trading suspension by the Tokyo Stock Exchange. Honda’s shares, however, rose by more than 8%, indicating investor relief over the potential deal’s termination.

In 2023, Nissan and Honda disclosed merger discussions to strengthen their market positions amid increasing competition from China’s BYD and other electric vehicle manufacturers. However, sources familiar with the negotiations stated that disagreements between the companies have complicated the talks. Two individuals with direct knowledge of the situation, speaking on condition of anonymity, noted that Honda’s suggestion for Nissan to become a subsidiary was a significant point of contention, deviating from the original goal of a merger of equals.

Nissan’s board met to evaluate the situation, but as of late afternoon, no final decision had been confirmed, according to a source close to the matter. Both companies issued statements asserting that the Nikkei report did not originate from official company disclosures and reaffirmed their intent to reach a conclusion by mid-February.

The potential collapse of the merger raises questions about Nissan’s restructuring efforts, which include reducing its global workforce by 9,000 and cutting production capacity by 20%. A source stated that Honda, whose market capitalisation is nearly five times that of Nissan, had concerns about Nissan’s progress in executing its recovery plan.

The merger discussions have also coincided with trade uncertainties, including potential U.S. tariffs that analysts suggest could disproportionately impact Nissan compared to Honda and Toyota. Morningstar analyst Vincent Sun remarked, “Investors may get concerned about Nissan’s future (and) turnaround.”

Negotiations were further complicated by governance concerns. Christopher Richter, a Japan autos analyst at CLSA, stated, “The news that Nissan did not want to be a Honda subsidiary suggests that control was a contentious issue. Without being able to have control, Honda appears to be walking away.”

Renault, Nissan’s long-time alliance partner, had previously indicated openness to a potential merger with Honda. The French automaker holds a 36% stake in Nissan, with 18.7% managed through a French trust. Mitsubishi Motors, another partner in Nissan’s alliance, had considered participating in the merger but has reportedly reconsidered, according to Reuters sources.

(With input from agencies)