Honda Nissan

Japanese car manufacturers Honda and Nissan are reportedly calling off their £46.2 billion ($58 billion) merger, announced in December 2024, amid concerns from Nissan regarding its corporate restructuring and discussions over becoming a subsidiary of Honda.

This decision comes at a time of turbulence for Nissan, which has been grappling with mass layoffs and uncertainties surrounding its overseas plants, including its Sunderland facility in the United Kingdom.

Nissan Pulls Out of the Deal

The Japanese newspaper Asahi Shimbun first reported that Nissan was stepping away from the merger, with sources indicating that the company's board strongly opposed Honda's proposal to make Nissan a subsidiary.

Further reports suggest that Nissan is now exploring alternative partnerships outside the automotive industry. The Guardian states that the company is considering a collaboration with the Chinese contract manufacturer Hon Hai Precision Industry, commonly known as Foxconn, which is best known for assembling Apple's iPhones.

However, Nissan has yet to confirm these reports. In a recent company disclosure, it stated that no formal decision had been made regarding the merger.

'Based on the memorandum of understanding signed on 23 December last year, Honda and our company are in the stage of advancing various discussions, including the contents of the report, and we plan to establish a direction and make an announcement around mid-February,' the company stated.

The Origins of the Nissan-Honda Merger

Nissan and Honda signed a memorandum of understanding (MOU) in December 2024 to explore a potential business integration, aiming to establish a joint holding company. Initially agreed upon in March 2024, the partnership was intended to advance vehicle intelligence and electrification, aligning with both companies' goals of achieving carbon neutrality and reducing traffic fatalities.

In August 2024, they further expanded their collaboration with another MOU, agreeing to conduct joint research on next-generation software-defined vehicle (SDV) platforms, particularly in intelligence and electrification. The move was meant to help both companies navigate the rapidly evolving automotive industry, enhance global competitiveness, and bolster Japan's industrial development.

Had the integration been realised, it could have enabled both automakers to pool resources, create synergies, and strengthen their market position with innovative products and services.

Nissan's Ongoing Financial Struggles

Nissan has been struggling financially in recent years, with declining sales and shrinking profitability. In the third quarter of 2024, the company reported an 85% drop in operating profit, translating to a net loss of £48.4 million ($60.1 million). Global sales dipped by 2.8% during this period, with a marginal 0.2% decline in the United States.

To counter these setbacks, Nissan has implemented cost-cutting measures, including reducing the production of specific models and pushing dealers to sell vehicles at a loss, further impacting its bottom line.

These financial difficulties have also strained Nissan's long-standing alliance with Renault. Established in 1999, the Renault-Nissan partnership has been marred by governance disputes and tensions over equity stakes. In an attempt to rebalance the alliance, Renault agreed to reduce its stake in Nissan from 43.4% to 15%, ensuring parity between the two companies.

A Push for Electric Vehicle Dominance

Nissan's proposed merger with Honda was largely driven by its ambitions in the electric vehicle (EV) market. The company has long been a pioneer in EV production, having introduced the Nissan Altra in 1997 and the widely popular LEAF in 2010. By 2014, Nissan had established itself as a leader in the all-electric vehicle segment.

In recent years, Nissan has expanded its EV lineup with models such as the Ariya SUV and the Sakura mini EV. The company marked a significant milestone in 2023 when it surpassed 1 million EV sales, 12 years after launching the LEAF.

Looking ahead, Nissan plans to mass-produce EVs powered by advanced all-solid-state batteries by 2028, aiming to enhance vehicle performance and reduce production costs. However, the company has faced setbacks in its EV strategy. In January 2025, Nissan announced a revision to its plans for the Canton, Mississippi plant, scrapping its initial strategy to manufacture a compact crossover EV at the site.

Despite these challenges, Nissan remains committed to expanding its electric vehicle offerings and securing its foothold in the rapidly evolving automotive market. The company's continued search for strategic partnerships signals a clear intent to accelerate EV production and make these vehicles more accessible to consumers.

While the collapse of the Honda-Nissan merger is a significant setback, it underscores Nissan's determination to reshape its future, focusing on innovation, financial stability, and long-term sustainability in an industry that is undergoing rapid transformation.

Writer's pick