Honda and Nissan have officially called off their planned megamerger following weeks of negotiations, both automakers confirmed on Thursday.
“It’s very unfortunate that we could not find the common ground to take a step toward the merger,” stated Honda President and CEO Toshihiro Mibe during a news conference.
The proposed merger, which aimed to create the world’s third-largest automobile manufacturer, was seen as a strategic move to counter their declining performance. Despite terminating merger discussions, Honda and Nissan plan to continue collaborating in areas such as software and electric vehicle technology.
Negotiations reportedly faltered when Honda suggested making Nissan its wholly owned subsidiary—a proposal that Nissan ultimately rejected. Initially, the plan was to establish a joint holding company that would fully own both automakers, with Honda selecting a leader and a majority of the board members. However, Mibe expressed the view that Honda needed greater control to facilitate swift decision-making under a “one-governance” framework, leading to the subsidiary proposal.
“We confirmed that the merger of the two companies had great potential to bring significant effects in various areas, ranging from platforms, purchasing, research and development, and back-office operations,” Mibe said. “At the same time, we also came to realize that it was necessary to swiftly and decisively implement painful decisions to achieve this.”
Nissan, however, preferred the original joint holding company structure. Nissan CEO Makoto Uchida explained the company’s stance during a separate news conference, saying, “Under the current situation, it is difficult to keep up with competition just by Nissan itself, so we had a serious discussion about the proposal by Honda.” He added, “We were unable to have confidence in how much Nissan’s independence will be ensured and whether our potential will be fully brought out if Nissan becomes Honda’s wholly owned subsidiary.”
Ultimately, both companies determined that halting discussions was the best course of action in light of the need for rapid decision-making and strategic execution in an increasingly volatile market. “Both companies concluded that, to prioritize speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification, it would be most appropriate to cease discussions and terminate the MOU,” the companies stated, referencing their prior memorandum of understanding.
Given that Nissan’s market capitalization is only about one-fifth of Honda’s, many viewed the merger as a potential rescue effort for Nissan, which has been facing financial struggles. In the first half of this fiscal year, Nissan’s net profit plummeted by more than 90%, primarily due to weak sales in the U.S. and China. Following these disappointing results, the company announced plans to cut 9,000 jobs worldwide.
Mitsubishi Motors, of which Nissan owns more than a third, had previously stated it would wait for the outcome of the merger talks before deciding whether to participate. When the three companies jointly announced the merger discussions in December, they set a target to finalize the deal by June and establish the holding company by the summer of 2026.
Had Honda, Nissan, and Mitsubishi proceeded with the merger, it would have left Japan with only two major automobile groups. Toyota—the world’s largest automaker—already counts Daihatsu Motor and Hino Motors as subsidiaries and maintains capital ties with Isuzu Motors, Suzuki Motor, Mazda, and Subaru.
The key challenge now is how Honda and Nissan will enhance their competitiveness against both traditional and emerging rivals in an era of rapidly evolving automotive technology. Some analysts argue that it will be difficult for either company to thrive independently and that Nissan should not have let pride stand in the way of Honda’s subsidiary proposal. Others, however, doubt whether a smooth merger was ever feasible, given the companies’ differing corporate cultures.
Reports suggest that Taiwan’s Hon Hai Precision Industry has expressed interest in investing in Nissan. Hon Hai, better known by its Foxconn trade name, entered the EV market in 2019. In 2023, the company recruited former Nissan executive Jun Seki to lead its EV business, and media reports indicate that he is actively working to establish ties with Nissan.
The automotive industry is becoming increasingly competitive, with nontraditional players like Tesla and BYD aggressively expanding their presence. These new entrants are leveraging advancements in connected and autonomous vehicles, along with the ongoing shift toward electrification, to challenge traditional automakers.