A Nissan Leaf S Plus.

Since the dramatic downfall of “Cost Killer” chief executive Carlos Ghosn in 2018, Japan’s Nissan Motor Co. has labored with weak sales and an outdated model lineup.

In December, Honda Motor Co. threw the company a lifeline by agreeing to consider a deal that would create one of the world’s biggest carmakers — and a more formidable rival to upstart Chinese electric vehicle (EV) brands.

A tie-up between the two Japanese rivals, with their separate histories and distinct cultures, was always going to be a delicate and complex undertaking. Honda insisted that Nissan must get its house in order before any deal could happen.

By early February, negotiations were in a deadlock as the inherent power imbalance between the two legacy brands threatened to tank the deal.

Could a Honda deal fix Nissan’s problems?

Honda has more than quadruple the market value of Nissan, and absorbing its rival would bring greater economies of scale.

The two already have a partnership with Mitsubishi Motors Corp. to develop software, batteries and other EV technology. Taking this further and consolidating their EV platforms, supply chains and research efforts would take the collaboration to another level.

That still won’t fully bridge the competitive gulf with electric-car makers such as BYD and Elon Musk’s Tesla Inc. Neither Honda nor Nissan yet offer the cheaper, more efficient batteries and accompanying software of those relative newcomers.

How bad are Nissan’s finances?

Nissan, founded about a century ago, is struggling. Its net income slumped 94 per cent in the six months to Sept. 30 as profits cratered in the US and China, making it harder to refinance a record amount of bonds due to mature in 2026.

In November, the Yokohama-based automaker said it would cut 9,000 jobs from its workforce of more than 130,000, and slash production capacity by a fifth.

What’s Nissan’s problem?

Nissan’s sales have been falling in Japan and China, and also in the US, its biggest and most important market. The company’s product lineup is looking outdated, leading to inventory backlogs that are forcing it to cut prices.

Nissan was seen as a trailblazer a decade ago thanks to the Leaf, a compact family car that was the world’s first mass market EV.

Since then, two things have happened: New Chinese competitors emerged offering EVs that are better equipped, and the US market has skewed toward hybrid vehicles that combine electric motors with combustion engines. Nissan failed to capitalize on the Leaf’s early success by staying ahead of the curve on EVs, or to develop a hybrid, as rival Toyota Motor Corp. did with its global hit, the Prius.

“Having no hybrids is one thing, but the company’s response to a changing situation was very, very slow,” said James Hong, an analyst at Macquarie Securities Korea Ltd.

Nissan concentrated the timing of new model releases and waited longer to update them. This left dealerships to cut prices to draw customers who would otherwise choose a more modern car from a rival brand.

As of early 2025, Nissan still lacked the latest-generation EVs and hybrids to compete effectively in China and the US.

When did things start going wrong for Nissan?

The seeds may have been sown during Nissan’s last crisis a quarter-century ago, when France’s Renault SA stepped in to take a controlling stake and dispatched “Le Cost Killer” Ghosn to engineer a turnaround. Ghosn cut purchasing costs, shut factories and eliminated 21,000 jobs.

Ghosn accelerated the rollout of new models to boost Nissan’s global market share. He also kept a tight lid on spending, so these cars ended up being less innovative than those of rivals, according to analysts who follow the company.

So to reach Ghosn’s sales goals, the company turned to offering customers hefty price incentives, especially in the US, and boosted sales to rental fleet operators at the expense of profits.

Nissan failed to squeeze all the potential benefits from the alliance with Renault by fully collaborating on product development. The partnership collapsed in 2018, when Ghosn was detained in Japan for suspected financial crimes. The shortcomings of Nissan’s model lineup have remained a problem for the company ever since.

What’s wrong with Nissan’s EVs?

The Leaf’s driving range is relatively limited compared with newer models. It uses a charging connector called CHAdeMO developed jointly with other Japanese automakers. Their US competitors didn’t adopt CHAdeMO, and today the charging systems used by BYD and Tesla have become the de facto standard in major markets.

In China, Nissan is having a hard time keeping up as local EV makers load their cars with high-tech features that appeal to consumers.

Why hasn’t Nissan management fixed these problems?

Nissan has a conservative business culture, and a succession of leadership changes have made it harder for its management to agree on solutions and stick with them.

Hiroto Saikawa, Ghosn’s successor, stepped down as CEO in 2019 over a scandal involving allegations of excessive compensation, and other executives left in the turmoil. Nissan overhauled its executive bench again on Dec. 11. CEO Makoto Uchida remained in place, while Jeremie Papin was tapped to become chief financial officer.