Honda and Nissan Merger Could Be Scrapped as Troubled Automaker Balks at Becoming Subsidiary

The proposed merger, worth $58 billion according to Ars Technica, between automakers Honda and Nissan could be scrapped, various reports suggest.

The deal was first announced on Dec. 23, per CNN, with the signing of a memorandum of understanding between Honda, Nissan, and Mitsubishi perhaps leading to the formation of the world’s third-largest automaker by way of a merger.

Honda-Nissan Merger Imperiled Due to Aggressive Bargaining From Honda, Poor Financials From Nissan

According to Kyodo News, “sources familiar with the matter” say Honda has recently placed pressure on Nissan to become a fully owned subsidiary, rather than a partner. This has caused Nissan executives to bristle, and Nissan execs apparently view the subsidiary plan as a “take it or leave it” ultimatum.

Even in the earliest days of negotiations, tensions arose from disputes concerning the valuation of assets and equity ratios, sources suggest.

Ars Technica indicated that no firm decision to scrap the talks — from Nissan’s side — had been made as of the afternoon of Feb. 4. Any formal announcement over the resolution of the matter is expected sometime next week, at the very earliest.

The third automaker that was to have been included in the talks, Mitsubishi, which itself is already allied with Nissan, has not yet made an appearance in headlines or reports related to the ongoing merger negotiations.

In December 2024, as the merger was announced, Honda CEO and President Toshihiro Mibe indicated a holding company would be needed to protect both brands during the merger — but also that Nissan would need to successfully execute a massive turnaround plan to be considered for partnership. That turnaround would involve the slashing of 9,000 jobs and the cutting of production capacity by 20% in response to Nissan’s poor financial fortunes.

In the six months ending in September 2024, Nissan had seen its profits plunge by 94% compared to the year prior.

Analysts Present Mixed Opinions on Future of Honda-Nissan Merger

Some analysts weighing in on the matter appear skeptical of the possibilities for the continuation of the merger between Honda and Nissan.

According to The Detroit News, Kohei Takahashi, a UBS Group AG analyst, presented a pessimistic take on the potential deal.

“We see a high risk of the merger being postponed because it may be difficult to confirm within six months or so the turnaround in Nissan’s earnings that is cited by Honda management as a condition for the merger,” Takahashi wrote. “Achieving complete agreement between the two companies looks challenging.”

The lack of a strong EV lineup — although Nissan does produce the Leaf model, which may be a bargaining chip in its favor — is also presenting a significant Achilles heel for both automakers, according to Vincent Sun, an analyst at Morningstar Inc.

“Both companies lack compelling EV offerings, and the combined entity would still face the challenge of building a new EV model pipeline,” Sun outlined. “It’s difficult for Nissan if they have to play a smaller role in the new entity rather than standing on an equal footing with Honda.”

That reality, along with Nissan’s dire financials, may be the only thing keeping talks alive. According to CNN, Morgan Stanley auto analyst Adam Jonas laid out the underpinning EV fundamentals of the changing auto sector as the merger talks were first announced in December.

“Legacy auto companies that don’t find new partners must face the prospect of being smaller companies with higher capital expenditures, and research and development costs per (every vehicle sold),” Jonas wrote at the time.

“Moreover, amidst a potentially broader consolidation era, the ones who chose not to participate effectively ‘get smaller.’ We’re entering a new phase of the auto industry where the strategies for scale and cost leadership put the focus on cooperation and potential changes in scope,” he concluded.