Japanese automakers Nissan and Honda have officially ended discussions regarding a proposed $60 billion merger, citing strategic differences. If successful, the deal would have positioned them as the world’s fourth-largest automaker. Initially, Mitsubishi Motors was also part of the conversation but later withdrew from negotiations. Instead of merging, Nissan, Honda, and Mitsubishi Motors will now collaborate under a strategic partnership, focusing on intelligent and electrified vehicle development. This new framework follows a Memorandum of Understanding (MoU) established in August 2023, emphasising innovation in the automotive sector.

Nissan’s Business Challenges

Nissan, Japan’s third-largest automaker, continues to grapple with business challenges. The company has struggled to regain stability following the 2018 arrest and subsequent removal of former chairman Carlos Ghosn. Industry analysts suggest that Nissan is in a precarious position compared to Honda. "Honda is in a strong position, while Nissan is facing considerable difficulties," said Christopher Richter, an automotive analyst at CLSA. "Right now, Nissan doesn’t have a partner and may need to rethink its strategy."

Reasons Behind the Breakdown

According to media reports, the merger discussions became complicated when Honda proposed that Nissan should become its subsidiary, a condition that ultimately led to the collapse of negotiations.

Nissan’s Restructuring Efforts

As part of its restructuring plan announced in November, Nissan is reducing its global production capacity by 20 per cent and cutting 9,000 jobs. The company has already shut down its Changzhou plant in China and is considering scaling down operations within its joint venture with Dongfeng Motor.

Potential Partnerships for Nissan

Despite the failed merger with Honda, Nissan remains open to new collaborations. Reports suggest that Taiwan’s Foxconn could emerge as a potential partner. Foxconn Chairman Young Liu stated that while the company may consider acquiring a stake in Nissan, its primary interest lies in cooperation rather than ownership.

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Competitive Pressures in the Automotive Industry

Japanese automakers are facing growing competition from Chinese electric vehicle manufacturers such as BYD. Additionally, potential U.S. tariffs could further impact their operations. Meanwhile, Honda reported a 7 per cent decline in profit for the nine months ending in December, with slower sales in China and Japan weighing on its automotive division. While Nissan navigates its challenges and explores new opportunities, the company’s decision to collaborate with Honda and Mitsubishi Motors on EV and smart vehicle technology signals a shift toward innovation rather than consolidation.