Cooperation remains vital for survival, yet the dynamics of the game have shifted.

In December 2024, the announcement of a potential Honda-Nissan merger sent shockwaves through the automotive industry.

However, this bombshell quickly fizzled out. On February 5, the Nikkei reported that Nissan Motor Company had decided to withdraw from the memorandum of understanding on business integration with Honda Motor Company. Initially planning to integrate through a holding company, the two sides failed to agree on key terms such as the integration ratio.

Dubbed by outsiders as the "last big bet of the Heisei era," this collaboration collapsed after months of negotiations. The news sparked widespread industry turmoil.

Clearly, partnership is the optimal solution for automakers to navigate current challenges. So, why are these two giants willing to "go it alone" rather than compromise?

From "Flash Marriage" to "Flash Divorce": Why Did the Merger Fail?

The fundamental differences between Nissan and Honda were evident from their inception.

Nissan, founded in 1933 with the backing of a zaibatsu system, has a meticulous "tech-savvy" approach. Its strength lies in cost control and manufacturing efficiency, exemplified by its globally popular models like the Sylphy and Teana, synonymous with "economical and practical".

Honda, on the other hand, is deeply rooted in engineer culture. Founder Soichiro Honda was renowned for "pursuing extreme performance," from motorcycles to dominating F1 racetracks. The company believes that "technology is faith." The red emblem of the Civic Type R and the hybrid supercar genes of the Acura NSX are testaments to Honda's "performance first" philosophy.

Image source: Honda

These contrasting corporate philosophies turned into a power struggle during merger negotiations.

Nissan hoped the new entity would continue its "reduce costs, increase efficiency" strategy and proposed incorporating some Honda factories into its global production system. Honda, however, demanded that Nissan become a subsidiary, allowing it to control management rights and expedite decision-making, including restructuring business performance. This proposal broke the original equal structure and was strongly opposed by Nissan.

The question of leadership remained unresolved. Who would lead the new company post-merger? This was a core issue in the negotiations.

While the sales volume gap between the two is not significant, Honda's financial data is superior to Nissan's. Unlike Nissan, which focuses solely on automobiles, Honda also derives substantial profits from motorcycles and engines. On the other hand, Nissan's performance continues to deteriorate.

According to Nissan's financial report for the first half of fiscal year 2025 (April 2024 to September 2024), operating revenue was 5.98 trillion yen, down 1.3% year-on-year; operating profit was 32.908 billion yen, down 90.2%; and net profit was 19.223 billion yen, down 93.5%. A previous Financial Times report quoted an unnamed Nissan executive stating, "Nissan has 12 or 14 months to survive."

In contrast, Honda's situation is more promising. During the same period, revenue increased 12.4% year-on-year to 10.7976 trillion yen; operating profit increased 6.6% to 742.6 billion yen; operating profit margin decreased from 7.2% to 6.9%; and pretax profit decreased 15.6% to 741.9 billion yen.

Therefore, it's understandable that Honda was unwilling to be dominated by an inferior partner.

Beyond the leadership issue, a deeper contradiction lies at the intersection of their technology roadmaps.

As automakers worldwide embrace pure electric vehicles, Nissan, with the first-mover advantage of the Leaf, plans to use e-Power hybrid technology as a transitional solution. Honda, however, has bet on hydrogen energy, launching the Clarity hydrogen fuel cell vehicle and collaborating with General Motors to develop new hydrogen power systems. This strategic divergence manifested in negotiations as a debate over "which technology to invest in for R&D over the next decade" – Nissan wanted to cut the hydrogen energy project, while Honda countered that the pure electric route carries too high a risk.

With significant differences on technology roadmaps and management arrangements, neither side was willing to妥协. Nissan, eager to reverse its decline, initially saw the merger as a lifeline but eventually concluded that it was better to fight alone than waste energy at the negotiation table.

Post-Breakup Era: Can Going Solo Soar?

Following the failed merger, Nissan and Honda coincidentally chose the same path – focusing on "hit product strategies".

Nissan's trump card is its electrification roadmap.

At a recent press conference at its Yokohama headquarters, Nissan CEO Makoto Uchida announced an investment of 2 trillion yen (approximately 100 billion yuan) and plans to launch 27 electric vehicle models by 2030, 19 of which will be pure electric. To fulfill this commitment, Nissan has opened up its "ancestral technology" e-Power hybrid system to Mitsubishi Motors and is focusing on solid-state battery R&D. A Nissan engineer candidly stated, "We must recreate a 'Sylphy myth,' only this time, the protagonist must be an electric vehicle."

Honda's choice is more akin to a big bet on technology.

While other automakers are building battery factories, Honda is investing R&D funds in two directions: one is forming Sony Honda Mobility, planning to launch the "entertainment mobile space" AFEELA 1, equipped with the PlayStation ecosystem, in 2025. The model offers two configurations, AFEELA 1 Origin and AFEELA 1 Signature, priced at $89,900 and $102,900, respectively. Production will begin in Ohio, USA, with sales expected to start in California, USA, in 2025, followed by deliveries in Japan from mid-2026.

Image source: Sony Honda Mobility official website

The second direction is accelerating the commercialization of hydrogen energy. Last June, Honda delivered the first batch of hydrogen fuel cell heavy-duty trucks (FCV) to a transportation company in California, USA. This FCV was jointly developed by Honda and General Motors, making Honda the first automaker to mass-produce FCV passenger vehicles in the United States.

According to Honda's plan, the period from fiscal year 2026 to fiscal year 2030 will be the formal transition phase from traditional fuel vehicles to pure electric vehicles. By 2030, Honda's sales of pure electric vehicles and fuel cell vehicles worldwide will account for 40% of its total sales, with annual production of pure electric vehicles exceeding 2 million units.

This "two-pronged" strategy may seem radical but reflects underlying anxiety. On January 9, Honda China released its latest sales report. In December 2024, Honda China's cumulative sales were approximately 111,900 units, down 32.52% from the same period last year (165,800 units). For the full year 2024, Honda China's sales were approximately 852,300 units, down 30.94% from the previous year (1,234,200 units).

Since February 2024, Honda's sales in China have declined year-on-year for 11 consecutive months, with sales dropping over 40% year-on-year for three consecutive months from July to September 2024. This has forced Honda to be aggressive amidst its anxiety.

The "breakup drama" between Nissan and Honda serves as a microcosm of the global automotive industry's transformation. While teaming up doesn't guarantee success, the risks of going solo are also evident.

Toyota is collaborating with BYD on the bZ3, and Volkswagen is partnering with Xpeng Motors. Multinational automakers are "leveraging force" in the Chinese market. In contrast, Nissan's Ariya electric vehicle has been delayed in Europe due to software issues, and Honda's e:NS1 has been criticized for lacking sincerity in its "oil-to-electric" transition.

Honda and Nissan have little room for error. If these traditional Japanese automakers cannot find allies in China, the largest new energy vehicle market, they risk suffering the same fate as Nokia in the mobile phone industry.

Cooperation remains vital for survival, yet the game has shifted.

With Tesla redefining cars through software and BYD dominating with vertical integration, the rules of the automotive industry have long been rewritten.

Today, the main battlefields of competition have shifted to three dimensions:

Technology Battle: Solid-state batteries, high-voltage platforms, end-to-end connectivity – every breakthrough has the potential to reshape the landscape. CATL's securing a 70 billion yuan order from BMW with its Qilin battery is compelling evidence.

Ecological Integration Battle: Many automakers are entering the AI race. Huawei's HarmonyOS cabin is tied to four industries, while Guangzhou Automobile and SAIC are embracing HarmonyOS. Automakers must either build their own ecosystems or choose sides.

Cost Life-and-Death Battle: When BYD brings the price of intelligent driving models down below 100,000 yuan, traditional automakers' manufacturing systems face a disruptive challenge.

In these three main battlefields, to put it diplomatically: Japanese cars are facing severe challenges in China and globally; bluntly: Japanese automakers have no chance at all.

Image source: Dongfeng Nissan

Therefore, both Nissan and Honda are eager to find new paths forward. As Carlos Ghosn, the former CEO of Nissan, stated, the Japanese government is committed to promoting a "team-up" between Honda and Nissan, which, to some extent, is a defensive strategy.

While teaming up still offers a chance of success, the mode of cooperation in the automotive industry has shifted from full-scale mergers to "precise marriages." Volkswagen invested $700 million in Xpeng Motors, and Audi is collaborating with IM Motors to develop an electric platform. The underlying logic is consistent – using technology licensing to gain entry into China's smart electric vehicle market. As Volkswagen CEO Oliver Blume noted, "Rather than developing from scratch, it's better to leverage local champions."

This "precise marriage" model, involving cooperation on specific technologies or markets while maintaining entity independence, is replacing traditional full-scale mergers. A Boston Consulting Group report states, "In the next decade, automakers will enter the era of 'cooperation networks,' and those who can occupy a node position in the ecosystem will have the right to speak."

Behind these "precise marriages" are automakers' responses to two major trends:

First, the speed of technological iteration is faster than anticipated, from lithium iron phosphate to solid-state batteries, and from L2 to urban NOA. Going solo can no longer cover all innovations. Second, consumer demand is fragmenting. Some prioritize autonomous driving, while others focus on range anxiety. Automakers must quickly compensate for their shortcomings through cooperation.

Therefore, the failure of the Nissan-Honda merger isn't necessarily all bad for both sides. Since full-scale mergers are outdated, embracing Chinese technology and engaging in precise marriages may be a better path forward.

The "breakup" between Nissan and Honda is essentially a microcosm of the collapse of the old order – when technology roadmaps diverge and market rules are rewritten, no one can rely solely on partnerships to navigate the storm. When "survival" becomes paramount, do you choose to share an oxygen mask with rivals or don a respirator and rush towards the eye of the storm? The choices made by Nissan and Honda may not be correct, but they at least prove one thing – in the unprecedented changes in the automotive industry, gamblers who dare to bet everything have a better chance of seeing the sunrise tomorrow than hesitant bystanders.

Source: Leitech