Nissan is in the process of pulling out of merger talks with Honda and looking for a new partner, according to reports.

Merger negotiations are now believed to have stalled on the back of latest conditions from Honda

The Japanese car giants signed a memorandum of understanding (MOU) in December over a possible ‘mega-merger’ but negotiations are now believed to have stalled on the back of latest conditions from Honda.

The deal, which would have created the third-largest global carmaker in sales volumes after Toyota and Volkswagen, was intended to build on the firms’ existing collaboration and help fight off rising threats and further their work on electric and autonomous vehicles through a joint holding company.

But reports say Honda was looking to change conditions and make Nissan a subsidiary.

Neither party, both due to announce financial results next week, has issued a formal statement on the status of talks but Honda said that it would “establish a direction and make an announcement around mid-February”.

Industry insiders now say Nissan is open to mergers with either automotive or technology firms.

One option it’s reportedly exploring is with Taiwanese electronics giant Foxconn, also known as Hon Hai Technology Group. It’s already believed to have unsuccessfully approached the struggling carmaker in December and then said to have asked Renault to sell its 35% stake in Nissan.

Honda and Nissan are Japan’s second- and third-largest car manufacturers respectively but have struggled with the switch to EVs and the rise of Tesla and Chinese EV brands. Nissan has also been hit by a scandal that began with the arrest of its former chairman Carlos Ghosn in late 2018 on charges of fraud and misuse of company assets.