Nissan’s decision to withdraw from merger discussions with Honda marks the latest setback for the struggling automaker as it faces declining sales, financial pressures, and an increasingly competitive electric vehicle (EV) market.
The talks, which began in December, aimed to create one of the world’s largest car manufacturers, but fundamental disagreements — particularly Honda’s insistence that Nissan become a subsidiary — led to their collapse, Reuters reported.
A merger born from necessity
The prospect of a tie-up was driven by necessity rather than strategic ambition. Since the ousting of former CEO Carlos Ghosn in 2018, Nissan has struggled to maintain its position in key markets. According to Bloomberg, its net income fell 94% in the six months to September 2023, and the company faced a looming debt challenge, with a record amount of bonds maturing in 2026. In an effort to cut costs, Nissan announced plans to slash 9,000 jobs and reduce global production capacity by 20%.
According to Reuters, the two automakers already collaborate on software, battery technology, and EV platforms alongside Mitsubishi Motors, but a full merger would have represented a much deeper level of integration.
The broader industry pressures
The global automotive sector is undergoing profound change. Competition from Chinese automakers, particularly in EVs, has reshaped the landscape. Tesla and BYD continue to expand their market share, offering vehicles with more advanced battery technology and software integration.
Nissan was once an early leader in EVs with the launch of the Leaf in 2010 but failed to sustain its momentum. Unlike Toyota, which invested heavily in hybrid technology, Nissan did not develop a competitive alternative to the Prius. Meanwhile, its reliance on the outdated CHAdeMO charging standard has limited its EV appeal outside Japan.
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Bloomberg reports that in key markets, such as the US and China, Nissan’s ageing product lineup has hurt its competitiveness. Dealerships have been forced to cut prices to clear inventory, reducing profit margins. Honda, though stronger, is also under pressure to accelerate its EV transition as global regulations tighten around emissions.
Why the talks collapsed
Despite the potential advantages of a merger, the deal was always going to be difficult. Honda’s condition that Nissan become a subsidiary was a key sticking point. Nissan’s leadership, still recovering from the breakdown of its long-standing alliance with Renault, was unwilling to cede control. Additionally, Honda wanted Nissan to first stabilise its operations before moving forward with any formal integration. Cultural differences may have also played a role. Honda has historically operated independently, while Nissan has a history of external partnerships.
Implications for the motor finance sector
The failure of the merger could have broader consequences for motor finance. Nissan’s financial instability raises concerns about its ability to refinance its debt in 2026, potentially leading to higher borrowing costs or the need for external intervention. If Nissan continues to struggle, lenders may tighten credit terms for the company and its suppliers, increasing financial pressures across the automotive supply chain.
For consumers, the breakdown of the deal may mean fewer competitive financing options for Nissan vehicles. Automakers with strong financial backing can often offer better leasing and financing deals, but with Nissan’s uncertain future, banks and captive finance arms may adopt a more cautious approach.
Honda, on the other hand, remains well-positioned to secure investment for its EV expansion, but without the additional scale of a Nissan merger, it may need to find new partners to remain competitive in a rapidly shifting market.
In the long term, the collapse of these talks highlights the increasing pressure on legacy automakers to adapt or consolidate. While Nissan and Honda have chosen to go their separate ways, the industry-wide shift towards EVs and autonomous driving is likely to force fresh alliances in the years ahead.
Nissan ends merger talks with Honda over subsidiary dispute
