What the Honda-Nissan Merger Collapse Means for EVs
The ambitious US$60bn merger between Japanese automotive giants Honda and Nissan has officially collapsed, ending hopes of forming the world's third-largest automaker.
The breakdown of negotiations, which began in December 2024, highlights the challenges traditional car manufacturers face in a rapidly-evolving and highly-competitive industry.
Key reasons for the breakdown
Disagreement on corporate structure: Honda, which has a market value nearly five times that of Nissan, proposed making Nissan a subsidiary—a move that Nissan strongly opposed. Nissan insisted on equal partnership despite its weaker financial position.
Differing approaches to restructuring: Honda expressed frustration with Nissan's slow execution of its turnaround strategy. Honda viewed Nissan's announcement to cut 9,000 jobs worldwide and reduce production capacity by 20% in November 2024 as insufficient.
Decision-making disparities: Honda executives found Nissan's decision-making process too slow, fuelling their push for a more dominant role in the proposed merger.
Nissan's pride and lack of urgency: Sources close to the negotiations cited Nissan's reluctance to make deep cuts and politically sensitive factory closures despite its weakened position.
In a joint statement, both companies confirmed Honda's proposal to transition the merger into a parent-subsidiary structure, with Honda taking control through a share exchange. This ultimately led to the termination of discussions.
Impact on both companies
Nissan has struggled with declining sales and leadership turmoil in recent years. Its failure to anticipate the growing demand for hybrid vehicles in the US market, combined with potential trade disruptions from US tariffs, places it in a precarious position.
Honda, in a stronger financial position, must now recalibrate its strategy to compete with Chinese EV manufacturers and global rivals.
As a sign of confidence, Honda announced a share buyback program, purchasing up to 24% of its total issued shares between January and December 2025.
Industry-wide implications
Growing competition in the EV market: Honda and Nissan have lagged in the EV market, particularly compared to Chinese automakers like BYD. The merger was seen as a strategy to pool resources and strengthen R&D capabilities in EV development.
Increasing consolidation pressure: Consolidation is becoming necessary as the automotive industry shifts toward electrification and autonomous driving. Larger players are looking for economies of scale to stay competitive.
The merger's failure dents Japan's position in the global auto market. As Tesla and Chinese automakers dominate the EV space, Japanese brands risk falling behind.
With the collapse of the merger, Nissan is now exploring new partnerships. Foxconn, the Taiwanese electronics manufacturer, has emerged as a potential candidate, with its chairman, Young Liu, expressing interest in collaboration.
EV collaboration
Despite the failed merger, both companies have pledged to continue working together on EV technology under a strategic partnership.
Their focus will be on advancing electrification and intelligence in vehicle development.
Both automakers must now fast-track their restructuring efforts, focusing on investments in electric and autonomous vehicle technology to maintain relevance in an increasingly competitive industry.
The collapse of the Honda-Nissan merger is a major setback for both companies and a reflection of the broader struggles in the auto industry. As they navigate their independent futures, their success will depend on their ability to adapt, innovate, and form strategic partnerships.
The industry will be watching closely to see how these Japanese giants tackle the evolving challenges of electrification, automation and global competition.
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