Rumors Heat Up: Why the \$35 Billion Honda-Nissan Merger Came Crashing Down?

Getty Images The Japanese automotive giants, Honda and Nissan, had hoped to merge their businesses to compete with Chinese rivals like BYD.

The merger talks between the two companies ultimately failed after they could not agree on a multi-billion-dollar deal. Together with junior partner Mitsubishi, the three firms aimed to combine forces against competition from rival manufacturers, especially in China. The proposed tie-up would have formed an auto group worth $60 billion and ranked as the world’s fourth-largest by vehicle sales after Toyota, Volkswagen, and Hyundai.

Despite the collapse of talks, Honda and Nissan will continue their partnership on electric vehicles (EVs). Analyst Karl Brauer from iSeeCars.com expressed that it was not a complete surprise for the merger to fail. He noted that many automotive mergers have ended in disappointment and highlighted that this one had equal potential for both positive outcomes and failure.

The planned collaboration between Honda and Nissan was seen as vital support for Nissan, which has experienced slow sales growth over recent years and faced turmoil with its top executives. In particular, former CEO Carlos Ghosn’s arrest in late 2018 following allegations of financial misconduct created further complications for the company.

During negotiations, Honda entered talks in a strong position as it remains globally popular, producing and selling more cars than Nissan. However, disagreement arose over the structure of any potential merger – specifically whether Nissan would be an equal partner or merely a subsidiary within the new conglomerate.

Jesper Koll from Monex Group observed that Japanese culture emphasizes equality in business partnerships, making it difficult to achieve true parity between Honda and Nissan without offending one party. Additionally, there was concern about potentially burdening Honda with financial responsibility for rescuing Nissan’s struggling operations.

Both companies also face the looming threat of tariffs in major markets like the United States. With Chinese manufacturers dominating the growing electric vehicle market, many global carmakers are struggling to stay competitive.

In March last year, before announcing merger plans, Honda and Nissan had already agreed on a strategic partnership for EV development aimed at challenging their competitors by 2030.

Without the potential of merging with Honda to ease its troubles, Nissan now faces an uncertain future. However, there are emerging possibilities: Taiwan’s Foxconn has expressed interest in investing in or purchasing shares of Nissan as part of a possible cooperation agreement. Renault, which holds a significant 36% stake in Nissan from its earlier rescue efforts, chimed in on the Honda-Nissan fallout by deeming the proposed deal terms “unacceptable.”

For any future deals involving Nissan, Brauer advises that success will depend heavily on leadership capable of identifying and executing synergies between both companies while navigating political and cultural challenges.

The automotive industry continues to evolve in response to globalization, technological advancements, and increased competition from manufacturers outside traditional market leaders. As the situation unfolds with Honda, Nissan, and others players like Foxconn stepping up potentially crucial roles for survival in an increasingly challenging environment – it will be interesting to see how the landscape of global car manufacturing evolves.