Nissan Steps Back from Honda Merger Amid Rising Pressures

Nissan is reportedly stepping back from merger discussions with rival Honda, according to sources familiar with the situation. The proposed US$60 billion deal, which aimed to create the world’s third-largest automaker, now faces increasing uncertainty. 

The two Japanese carmakers began talks in December 2024 with the goal of combining forces to counter the growing competition from companies like China’s BYD and other electric vehicle (EV) entrants. However, sources indicate that Honda’s desire to take a controlling position in the merger—shifting from the originally intended equal partnership—became a major sticking point. This change led Nissan to reassess its position.

"Without being able to have control, Honda appears to be walking away," said Christopher Richter, analyst, CLSA. Additionally, Honda’s market value is significantly higher than Nissan’s, with Honda valued at approximately ¥7.92 trillion (US$51.90 billion) compared to Nissan's ¥1.44 trillion (US$9.50 billion).

Both Nissan and Honda issued statements clarifying that no official decisions had been made regarding the merger, but they aim to finalize their plans by mid-February. Despite these reassurances, sources suggest that Honda’s concerns about Nissan’s ability to recover from its ongoing crisis have raised doubts about the merger's feasibility.

Nissan’s difficulties, stemming from its troubled recovery following the 2018 departure of former chairman Carlos Ghosn, have been exacerbated by the global shift toward electrification. The automaker has struggled with declining market share in key regions like the United States and China. Additionally, the company is implementing a restructuring plan that includes cutting 9,000 jobs and reducing global production capacity by 20%.

These internal challenges are compounded by external factors, including the looming possibility of a 25% tariff on cars manufactured in Mexico and Canada, which US President Donald Trump has threatened. If enacted, this tariff would heavily impact Nissan, as the company relies on its Mexican plants for a significant portion of its US sales. Approximately 27% of Nissan’s US sales depend on vehicles produced in Mexico, significantly higher than Honda’s 13% and Toyota’s 8%.

"The problem is Nissan, which basically barely makes money in the automotive business. The longer the tariff stays in place, I think it could be a big threat for Nissan," said James Hong, director of mobility research, Macquarie. 

The situation is further complicated in Argentina, where Nissan has experienced a sharp decline in sales, particularly for its Frontier model. In 2024, only 6,758 units were sold, down 47% from the previous year. The company’s plant in Cordoba has faced frequent shutdowns, and Renault, once a partner in the alliance, has taken control of the project. It is likely that Nissan will cease operations in Argentina and instead source its pickups from Mexico.