Honda’s merger deal with Nissan was first announced in December 2024 where both companies were exploring options of integrating the two businesses. The $58B merger proposal was set to create the world’s fourth largest carmaker, however, talks collapsed on 13th Feb 2025 as Honda ruled out a takeover bid for Nissan. Global private equity firms such as KKR are currently monitoring Nissan’s situation; however, it is currently unclear if an investment proposition is viable.
Why have talks collapsed between Honda and Nissan?
According to Reuters interviews with over a dozen people, all of whom spoke on the condition of anonymity due to the topic’s sensitivity, the main reasons resulting in the collapse of the deal were:
Nissan, which for years until 2020 was Japan's second-largest automaker behind Toyota, insisted on receiving near-equal treatment in the talks despite its weaker position, three of the people said.
Honda managers felt Nissan's turnaround strategy lacked details and were frustrated by what they saw as an insufficient reduction in factory capacity, two sources noted.
Four people commented that Honda managers complained that Nissan's decision-making was too slow.
One individual noted that Nissan did not wish to shut factories due to the inevitable write-down of their value on paper and the hit to earnings.
Moreover, disagreement from Renault (Nissan’s largest shareholder) on the details of Honda’s proposal contributed to the deal being abandoned. While Renault mentioned that they were not involved in the discussions, information suggested the transaction would result in a takeover of Nissan by Honda without a control premium for Nissan shareholders. Such an outcome was "not acceptable", Renault commented, adding it would "vigorously defend" its interests.
Currently, Renault holds a 36 per cent stake in Nissan, including a remaining 18.7 per cent in a French trust, that it wants to offload. People close to Renault have said the company is open to selling some of its shares in Nissan once a deal materialises.
Why does Nissan require investment?
Nissan’s thirst for investment is driven by multiple factors. These include an outdated product lineup resulting in inventory backlogs that are forcing price cuts, conflict within management, and a lack of investment reducing international competitiveness, especially in EV markets.
Nissan had swung to a ¥14bn (~$92M) loss in the quarter to the end of December 2024 and now expects a full-year loss of ¥80bn (~$525M) after earlier predicting a profit as high as ¥380bn (~$2.5B).
Nissan’s net income fell 94% in the six months to Sept. 30 as profits slumped in the US and China, making it more difficult to refinance a record amount of bonds (about $5.6B) due to mature in 2026 (see below):
Over a decade ago, Nissan unveiled the Leaf, a compact family car that was the worlds first mass market EV. What has happened since then is Chinese EV competitors began offering many EV’s with better tech, luxury, and performance for extremely competitive prices. We also saw the US shift preferences slightly towards hybrid vehicles that combine electric motors with combustion engines.
Nissan failed to capitalise on the Leaf to stay ahead of the EV curve, or develop a hybrid, unlike its competitors such as Toyota with their very popular Prius model, and as of 2025 Nissan still lacks the latest generation of EVs to effectively compete in Chinese and US markets. Indeed, James Hong, an analyst at Macquarie Securities Korea Ltd stated that “the company’s response to a changing situation was very, very slow”.
According to Nicholas Takahashi at Bloomberg, Nissan’s downfall began when Renault acquired a controlling stake in 1999, and dispatched Carlos Ghosn (known as ‘Le Cost Killer’) for a turnaround. After cutting purchasing costs, shutting factories, and wiping out 21,000 jobs, Ghosn kept a tight cap on spending according to analysts, resulting in Nissan’s vehicles being less innovative than those of their competitors. To reach Ghosn’s sales goals, Nissan began offering hefty price discounts, increasing market share at the expense of profits. The partnership collapsed in 2018, when Ghosn was detained in Japan for suspected financial crimes.
Nissan's ongoing struggles have been amplified by its conservative business culture and frequent leadership changes, making it difficult for management to agree on and implement long-term solutions. The lack of stability has slowed decision-making and hindered the company’s ability to adapt to industry shifts. Moving forward, Nissan must find a clearer strategic direction to regain competitiveness in the evolving automotive market.
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