Failed Nissan-Honda merger talks send shockwaves through Japanese auto sector

Wednesday 05 February 2025 - 12:20

By: Dakir Madiha

Failed Nissan-Honda merger talks send shockwaves through Japanese auto sector

Nissan has officially ended merger negotiations with Honda, abandoning plans that would have created a formidable automotive alliance. The news, reported by the Nikkei financial daily, triggered significant market movements, with Nissan's shares plummeting while Honda's stock surged on the Tokyo Stock Exchange.

The merger initiative, introduced in December 2024, aimed to establish a unified holding company that would compete with major global automotive manufacturers. The ambitious plan targeted positioning the combined entity as the world's third-largest automaker by 2026. However, Japanese media sources revealed that Honda's intention to acquire Nissan's shares and convert it into a subsidiary clashed with Nissan's desire for autonomy.

The market reaction was immediate and dramatic. Nissan's stock dropped 4.86% mid-day, prompting the Tokyo Stock Exchange to temporarily halt trading pending confirmation of the news. Conversely, Honda's shares experienced a remarkable 12% increase. Both companies have declined to comment on the circumstances surrounding the failed negotiations.

The proposed merger was designed to address critical industry challenges, particularly the shift toward electric vehicles. In this sector, where Tesla and Chinese manufacturers like BYD maintain dominance, both Japanese companies lag significantly. For Nissan, the merger represented a potential lifeline amid financial struggles, including unexpected losses in the third quarter of 2024 and declining operational margins. The company has already announced 9,000 global job cuts and production capacity reductions.

Without the merger, Nissan faces a challenging path forward in the rapidly evolving automotive landscape. The company must now seek alternative strategies to close the gap in electric vehicle development and identify new growth opportunities independently.