On December 23, 2024, Honda Motor and Nissan Motor announced the signing of a Memorandum of Understanding (MoU) to officially begin merger negotiations, discussing the integration of their businesses into a single holding company. The merger was expected to be completed by August 2026.
However, on February 13, 2025, the two companies announced the termination of the basic agreement signed on December 23, 2024, and ended their merger discussions. Moving forward, they will collaborate under a strategic partnership framework focused on automotive intelligence and electrification to maximize their respective corporate values.
In just over 50 days, a deal that could have created the world's fourth-largest automaker collapsed.
According to Reuters, after interviewing more than ten insiders, it was reported that negotiations quickly hit a bottleneck over the shareholding ratio in the merged company. Just over a month into the talks, discussions fell apart due to Nissan's overconfidence and lack of awareness of its precarious situation, as well as Honda's sudden decision to amend the terms by proposing to make Nissan a subsidiary of Honda.
A Look at the Numbers
Sales: In 2024, Honda sold 3.8 million vehicles globally, while Nissan sold 3.3 million.
Profit: In the first nine months of the fiscal year (ending December 31, 2024), Honda's operating profit was 1.1 trillion yen, whereas Nissan's was 64 billion yen.
Market Value: As of February 12, Honda's market capitalization was approximately 7.5 trillion yen ($48.6 billion), nearly five times that of Nissan.
Key Markets:
Honda's most important market is the U.S., accounting for 37% of its global sales in 2024. North America (including Canada and Mexico) makes up 42%, China 22%, Japan 17%, and Europe just 3%.
Nissan's largest market is also North America, representing 38% of its global sales in 2024. The U.S. alone accounts for 27%, followed by China (21%), Japan (14%), and Europe (10%).
Electrification Goals:
Honda aims to produce over 2 million electric vehicles (EVs) annually by 2030, with 40% of its new car sales being EVs and fuel cell vehicles (FCVs). By 2040, it plans to sell only these two types of vehicles. Additionally, it targets annual hybrid sales of 1.3 million by 2030, doubling the 2023 figures.
Nissan aims for 60% of its global sales to be EVs and hybrids by 2030.
Workforce: As of March 2024, Honda had 194,993 employees as a conglomerate, while Nissan had 133,580.
The strength disparity between the two companies is clear. Years of declining sales and leadership turmoil have weakened Nissan. Its misjudgment of hybrid vehicle demand in the U.S. further exacerbated its struggles.
However, Nissan may not perceive itself as weak, given that it was once Japan's second-largest automaker. Reuters reported that Nissan insisted on near-equal treatment in negotiations. While Honda's proposal was seen as a lifeline for Nissan, Nissan seemingly viewed Honda as just another business partner.
Nissan Lacked a Clear Awareness of Its Crisis
Since the dramatic downfall of former CEO Carlos Ghosn in 2018, Nissan has struggled with sluggish sales, an outdated model lineup, and disappointing financial performance, repeatedly letting down investors.
From a product perspective, Nissan's aging lineup has led to excessive inventory, forcing dealers to slash prices to attract buyers. In the EV sector, Nissan has been slow to keep pace. Once considered a pioneer in the EV industry, Nissan failed to capitalize on the early success of the Leaf and did not develop a best-selling hybrid like Toyota.
As of early 2025, Nissan still lacks next-generation EVs and hybrids competitive in China and the U.S. Consequently, Nissan's sales have been declining in Japan, China, and even its most crucial market, the U.S. James Hong, an analyst at Macquarie Securities Korea Ltd., commented, "Not having hybrid models is one thing, but the company's response to shifting trends has been extremely slow."
Nissan's management has also been in turmoil. Bloomberg reported that Nissan's conservative corporate culture, coupled with frequent leadership changes, has made it difficult to establish and stick to effective strategies. Ghosn's successor, Hiroto Saikawa, resigned in 2019 amid an executive pay scandal. Other senior leaders also left amid internal strife. On December 11, 2024, Nissan underwent another major leadership reshuffle, with CEO Makoto Uchida remaining, and Jeremie Papin, former head of Nissan North America, appointed as CFO.
In the latest quarter, Nissan's operating profit plummeted 78% year-over-year to 31.1 billion yen, far below the analysts' average estimate of 63.2 billion yen. Additionally, Nissan cut its full-year (ending March 31, 2025) operating profit forecast by 20% to 120 billion yen-the third downward revision this fiscal year.
Reuters reported that insiders felt Nissan approached negotiations with Honda as if it could still sustain itself despite mounting challenges. Analyst Julie Boote of Pelham Smithers Associates noted, "Nissan's leadership has unrealistic views on industry trends and what needs to be done. They completely overestimate their strength, brand value, and ability to turn things around."
Honda Proposed Making Nissan a Subsidiary
On February 13, Honda stated that during negotiations, both parties explored various integration methods. Honda eventually proposed shifting from a joint holding company structure to a share exchange arrangement, making Honda the parent company and Nissan a subsidiary.
According to insiders, Nissan was caught off guard by this move, viewing the proposal as "outrageous" and a blow to its dignity. Honda CEO Toshihiro Mibe assured that Honda had never and would never consider a hostile takeover of Nissan. However, Honda's sudden change in deal structure reflected its growing impatience with Nissan's slow negotiation process.
Initially, many-including Ghosn-speculated that Japan's Ministry of Economy, Trade, and Industry (METI) had intervened in the talks to prevent one of Japan's most iconic companies from falling into foreign hands, especially after reports surfaced that overseas firms were interested.
Bloomberg suggested that there was reason to suspect the deal was imposed on Honda. Both companies stated that the merger was necessary to remain globally competitive, yet when asked in December why Honda was interested in Nissan, Mibe struggled to answer. "Uh… that's a difficult question," he said, nervously laughing. After a long pause, he eventually cited Nissan's history and tradition. Reportedly, even Nissan CEO Makoto Uchida privately expressed doubts about the deal's prospects. However, Mibe maintained that the Japanese government neither initiated nor participated in the negotiations.
As discussions progressed, Honda realized Nissan was slow in decision-making and lacked a concrete turnaround strategy. When Honda and Nissan announced their MoU in December, Honda had already made it clear that Nissan needed restructuring for any deal to work.
As part of its cost-cutting measures, Nissan had already committed to laying off 7% of its global workforce. However, one insider noted that Honda had cut more employees in China alone over the past two years than Nissan's entire global layoff plan.
Moreover, despite planned layoffs and production cuts, Nissan had no intention of shutting down factories. Aside from its "geopolitically competitive" Kyushu plant, Nissan viewed its Smyrna plant in Tennessee, Aguascalientes plant in Mexico, and Sunderland plant in the UK as vital to its EV strategy and was unwilling to close or downsize them.
