Honda Motor (7267.T) is prepared to resume talks with Nissan (7201.T) about creating the world’s fourth-largest automaker, provided Nissan CEO Makoto Uchida steps down, according to a report from the Financial Times on Tuesday, citing a source familiar with the discussions. The two Japanese companies had initially announced plans to collaborate last year, but the project fell apart due to tensions over the power dynamics within the new entity, as well as Honda’s proposal for Nissan to become a subsidiary. The collapse of these talks highlights the challenging future for traditional automakers, who are facing mounting competition from rapidly growing Chinese brands that are reshaping the industry.
The merger aimed to create a company that could better compete against global rivals such as Toyota Motor (7203.T) and Volkswagen AG (VWO.UL). However, a lack of hybrid models in the U.S., a key market for both companies, has hurt sales in recent years and exacerbated concerns over whether Nissan is strong enough to drive a turnaround without help from Honda.
Nissan’s failure to raise its earnings forecast, slash 9,000 jobs, and cut global capacity by 20% further weakened the case for a deal. In addition, the fugitive former chairman Carlos Ghosn’s arrest and the threat of U.S. tariffs on cars made in Mexico weighed on the company.
Sources familiar with the matter said that while both companies remained committed to collaborating on electric vehicles and other new technology, they were not confident that they could overcome disagreements over leadership and control of the company. They also feared a complex governance structure would hinder decision-making, especially in volatile areas like EV development.
Honda, Japan’s second-biggest automaker by revenue, has struggled to make headway in the EV market. It is also facing pressure from French partner Renault RNO to step down as its chief executive. Uchida has told shareholders he plans to stay until 2026. However, the FT said he would face pressure from board members and Renault to quit in the coming months after the merger talks broke down.
The boards of both companies will meet soon to decide on their next move, but a Honda spokesperson said the outcome was “unclear.” The companies had planned to make a decision by mid-February.
Nissan, the third-biggest automaker by sales, is also struggling to compete in the booming global market for electric vehicles and has faced pressure from shareholders to improve its finances and management structure. It is also facing uncertainty over the impact of tariffs on its car exports to the United States.
Both companies have struggled to adapt to a changing auto industry, as electric vehicle production has boomed and demand for gasoline-powered vehicles has slumped. They also face challenges from a slowing global economy, supply chain disruptions, and labor disputes. The ill-starred Nissan has been particularly hard-hit by turmoil since Ghosn’s arrest in 2018 and a slump in its stock price last year.
