Nissan-Honda merger deal on the verge of being called off

KUALA LUMPUR: Back in December, Nissan and Honda signed a memorandum of understanding to begin discussions on a potential merger, leading to the formation of the third-largest automotive firm in the world after Toyota and Volkswagen AG. Well, it seems that things did not fall in place, and the Japanese auto giants are parting ways.

As reported by Japan’s Kyodo news agency and Nikkei newspaper, Nissan is pulling out of the deal on account of growing conflicts over its assets' equity ratio and valuation. However, the automaker denied merger-scraping reports while mentioning that discussions are still underway with a decision expected later this month.

The market reports highlighted that Honda proposed the idea to make Nissan its subsidiary, which is highly opposed by Nissan’s key people. Also, Nissan failed to convince Honda that its restructuring plan would help it recover. 

The impact of such reports was clearly visible on the Tokyo Stock Exchange, where trading of Nissan shares were halted after a decline of 5%. Honda’s share price, on the other hand, was up by 8%. 

For starters, Nissan has been facing several financial problems since the collapse of its alliance with Renault, which led it to do nothing but join hands with its larger rival. 

The company reported a 94% decline in six months’ profit ending September 2024 as it lost money in the auto business and made a narrow margin in its financing operations. As a result, it has decided to cut production output by 20% and lay off 9000 jobs. The situation is so bad that even some analysts speculated that Nissan would file for bankruptcy in 2026.

Well, the merger can turn Nissan’s fortune. Along with Honda, Mitsubishi Motors is also supposed to join this alliance. As per the earlier signed MoU, three companies are expected to finalize the deal by the end of 2025. 

This unification is expected to produce 8 million vehicles and generate an estimated profit of USD 19 billion (approx RM 85 billion) in a year, making it one of the largest conglomerates in the automotive world. By joining hands, the automakers will be able to share vehicle platforms, reducing their expenses for the development of ICE-powered as well as electrified vehicles.

If the merger is called off, Nissan will be left searching for alternative strategies to remain alive.

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