Japanese automakers Honda (7267.T) and Nissan (7201.T) may call off merger talks, the Asahi Shimbun newspaper reported on Wednesday, citing multiple sources, a move that would pitch hard-hit Nissan into greater uncertainty.
Honda, Japan's second-largest car maker, and Nissan, its third-largest, announced last year that they were in talks to merge their businesses, a pivotal change for Japanese industry that underlined the vast threat posed by China's BYD (002594.SZ) and other new electric vehicle entrants.
The tie-up would create the world's third-largest auto group by vehicle sales after Toyota (7203.T) and Volkswagen (VOWG_p.DE).
The global auto industry is being disrupted by a once-in-a-century shift driven by EV makers, raising questions about the future of legacy automakers. Nissan has been hit harder than some others, having never fully recovered after years of crisis sparked by the arrest and ouster of former Chairman Carlos Ghosn in 2018.
The tie-up talks have also coincided with the additional disruption posed by potential tariffs from U.S. President Donald Trump. Tariffs against Mexico would be more painful for Nissan than for Honda or Toyota, according to analysts.
The boards of both Nissan and Honda will meet separately in the near future to discuss potentially calling off the merger talks, the Asahi reported. For Honda, the talks were not progressing as the bigger automaker had hoped, it said.
Honda's market value of $47 billion is nearly five times bigger than that of its smaller rival.
Honda had sounded out Nissan about becoming a subsidiary, an idea that Nissan had strongly opposed, the Asahi reported. In December, the automakers had said they aimed to set up a holding company by August 2026, when both of their shares would then be delisted.
The two companies had initially said they planned to decide the direction of the integration by the end of January, but that was later pushed back to mid-February.
Nissan plans to hold its board meeting as soon as Wednesday afternoon, where it will likely vote down Honda's proposal to buy Nissan shares and make it a subsidiary, Bloomberg News reported, citing a person familiar with the matter.
A Nissan spokesperson said discussions were ongoing between the companies and there would be an announcement after they finalised their direction in mid-February, as previously announced.
A Honda spokesperson also declined to comment, saying the automaker intended to make an announcement by mid-February.
Nissan's long-term alliance partner Renault (RENA.PA) has previously said it is open in principle to the merger. The French automaker owns 36% of Nissan, including 18.7% through a French trust.
Sources told Reuters last month that Nissan's smaller alliance partner Mitsubishi Motors (7211.T), which had considered joining the merger, might not do so.
