Nissan shares fly as a new partner enters deal talks

Nissan Motor Co. is back in the market for a new partner after rejecting Honda’s proposed merger terms. As the automaker struggles with declining profits and job cuts, Taiwanese electronics giant Foxconn is reportedly renewing its interest in a potential deal. 

Nissan’s stock price rose as much as 6% after news of Foxconn’s reentry came out. Nissan’s decision to walk away from Honda could reshape the Japanese auto industry and determine its future in the electric vehicle (EV) market.

Why Nissan rejected Honda’s proposal
Nissan and Honda announced plans in December to merge under a single holding company, a move that would have created the world’s third-largest automaker, including Mitsubishi Motors. However, sources familiar with the negotiations said that Honda’s revised terms would have made Nissan a subsidiary rather than an equal partner, a condition Nissan’s board found unacceptable.

The breakdown of the merger talks has significant implications. Honda’s stock jumped more than 8% following reports that Nissan was backing out, while Nissan’s own shares fell by nearly 5%, reflecting market concerns about the company’s ability to survive without a strong partner.

Foxconn’s renewed interest
With Honda talks unraveling, Nissan is reportedly exploring other partnership options, and Foxconn may be back in the mix. Hon Hai Precision Industry Co., better known as Foxconn, was previously in discussions with Nissan about an investment or buyout but backed away in December. Now, with Nissan once again searching for a lifeline, Foxconn Chairman Young Liu has instructed former Nissan executive Jun Seki to reach out to Renault, Nissan’s largest shareholder, about a potential collaboration.

Foxconn has been working to establish itself as a contract manufacturer for EVs, leveraging its experience producing electronics for companies like Apple and Sony. A deal with Nissan could help Foxconn strengthen its position in the EV industry while providing Nissan with much-needed financial stability and technology expertise.

A long road to stability for Nissan
The failed merger with Honda leaves Nissan in a vulnerable position. The company is already facing significant financial difficulties, reporting a staggering 94% drop in net income for the first half of the fiscal year. To cut costs, Nissan announced it would lay off 9,000 workers and reduce its manufacturing capacity by 20%.

In addition to financial struggles, Nissan has been losing market share in the U.S. and China, two of the world’s most competitive auto markets. Without a strong partner, Nissan risks falling further behind as the industry shifts toward EVs and autonomous vehicles. A new partner could help begin to turn the company around, but it has a long way to go.

Final thoughts
While Nissan has not officially ruled out all collaboration with Honda, insiders suggest the company is moving in a different direction. With Foxconn’s renewed interest, Nissan could have an opportunity to pivot toward an EV-focused strategy. However, any potential deal would require approval from Renault, which holds a 36% stake in Nissan.

Nissan’s upcoming earnings report will shed more light on its financial position and potential strategic moves. Whether the company can secure a deal that helps it to begin turning things around remains an open question.