Nissan Informs Honda of Termination of Merger Talks: "Refuses to Become a Subsidiary"

 

Nissan Rejects Honda’s Subsidiary Proposal, Advocates for Equal Merger Amid Uncertain Future in EV Market

Nissan Motor Co. has officially notified Honda Motor Co. of its decision to halt merger discussions that began in December 2024, according to reports from Asahi Shimbun and other Japanese media outlets on February 6, 2025. The collapse of the highly anticipated merger between Japan's second and third-largest automakers is primarily attributed to Nissan’s rejection of Honda’s proposal to make it a subsidiary. Instead, Nissan insisted on an equal merger, highlighting deep-rooted tensions over corporate identity and governance structures.

The breakdown of these talks casts a shadow over both companies' futures amid the rapid transformation of the global automotive industry, driven by electric vehicles (EVs) and software-defined vehicles (SDVs). Analysts suggest that the failure to consolidate could leave both automakers vulnerable to intensifying competition from global EV giants like Tesla and China’s BYD, which have already surpassed traditional Japanese manufacturers in sales.

Nissan’s Board Rejects Merger, Citing Need for Equal Partnership

Nissan CEO Makoto Uchida personally conveyed the company’s decision to Honda President Toshihiro Mibe during a meeting at Honda’s Tokyo headquarters. Both companies are expected to hold board meetings soon to officially withdraw from the Memorandum of Understanding (MOU) signed in December 2024, which outlined preliminary terms for a potential merger. According to Yomiuri Shimbun, Nissan’s board reached a consensus to terminate the merger discussions due to internal opposition against becoming a subsidiary under Honda’s control.

The merger was initially aimed at creating a global automotive powerhouse, potentially surpassing Hyundai Motor Group in annual sales to secure the third position worldwide. The proposed holding company structure would have positioned both Nissan and Honda as subsidiaries, with an official launch planned for August 2025. The combined sales volume, based on 2023 data, was projected to reach 7.35 million units, overtaking Hyundai's 7.3 million.

However, the merger talks were complicated by Honda’s perception of Nissan as a struggling company in need of rescue. During the initial press conference announcing the negotiations, Honda’s CEO emphasized that Nissan’s “turnaround” was a critical condition for the merger. While Nissan proposed restructuring plans, including a 7% workforce reduction (approximately 9,000 jobs) and a 20% cut in global production capacity, Honda deemed these efforts insufficient and demanded further cost-cutting measures.

When negotiations stalled, Honda suggested a more aggressive approach—transforming Nissan into its subsidiary to directly oversee its restructuring. This proposal met with fierce resistance from Nissan, which saw it as an affront to its corporate pride and historical legacy. Despite Honda’s significantly larger market capitalization—estimated to be five times that of Nissan—Nissan remained adamant about maintaining an equal footing in any partnership.

The Fallout: Strategic Uncertainty Amid Global EV Competition

The sudden termination of the merger talks is expected to impact both companies negatively, especially as the automotive industry undergoes one of the most significant transformations in its history. The rise of EV leaders like Tesla and BYD has disrupted traditional automakers’ dominance, forcing companies to reconsider their long-term strategies. In 2024, both Nissan and Honda’s global sales lagged behind BYD, which sold 4.27 million vehicles compared to Honda’s 3.8 million and Nissan’s 3.34 million.

While the merger is off the table, reports suggest that Nissan remains open to collaborating with Honda in specific areas, such as EV battery development, software integration for SDVs, and the standardization of key automotive components. Nevertheless, industry experts question whether the two companies can overcome the mutual distrust that emerged during the failed negotiations.

Honda, in particular, may need to reassess its future mobility strategies. The company has committed to producing only electric and fuel cell vehicles (FCVs) by 2040—a goal that requires substantial investments in research, development, and infrastructure. Analysts point out that Honda may struggle to shoulder these financial burdens alone without strategic partnerships or mergers to share costs.

The Foxconn Factor: Potential Acquisition Interest Looms

Another critical factor influencing the merger’s collapse is the growing interest of external players, notably Taiwan’s Foxconn (Hon Hai Precision Industry Co.). As the largest supplier for Apple, Foxconn has been expanding aggressively into the EV sector. According to Nikkei, Foxconn has shown interest in acquiring a stake in Nissan, potentially reshaping the company’s future trajectory. This development has raised speculation that Nissan’s decision to end talks with Honda may have been influenced by behind-the-scenes negotiations with Foxconn.

Nissan’s largest shareholder, Renault, could also play a pivotal role in the company’s next steps. If Renault determines that Nissan cannot recover independently, it may consider selling part of its stake, opening the door for Foxconn or other investors to gain influence. Industry insiders believe that Foxconn’s ambitions in the EV market could significantly impact Nissan’s restructuring efforts, especially if it seeks to integrate advanced manufacturing technologies and supply chain efficiencies from its consumer electronics business.

What’s Next for Nissan and Honda?

Both Nissan and Honda have announced plans to clarify their future strategies by mid-February 2025. While the merger may be off the table, the need for collaboration in areas like EV technology, software development, and supply chain management remains critical. Whether these former rivals can find common ground in strategic partnerships without the framework of a merger will likely determine their ability to compete in the rapidly evolving global automotive landscape.

In the meantime, all eyes are on Foxconn and Renault, whose decisions could reshape the future of Japan’s automotive industry. As Nissan and Honda face the dual pressures of technological disruption and shifting global market dynamics, the question remains: can they thrive independently, or will new alliances emerge from the ashes of their failed merger?