On Thursday, Nissan president Makoto Uchida informed his counterpart, Honda president Toshihiro Mibe, that he was pulling out of merger talks, according to several media reports. 

A withdrawal ends months of behind-the-scenes conversations between the two Japanese carmakers. The two auto giants, along with fellow carmaker Mitsubishi Motors, announced in late December that they would explore a merger, possibly creating the world’s third-largest automaker.

Honda, No. 57 on the most recent Fortune Global 500 ranking, reported $141.3 billion in revenue for 2023; Nissan, at No. 136, reported $87.8 billion. Together, Honda and Nissan’s combined revenue of $229.1 billion would have pushed them to No. 22 on the 2024 Global 500, just behind JPMorgan. And it would have been the third-largest automaker on the ranking, behind Volkswagen and Toyota. 

Yet, Nissan’s future reportedly became the sticking point in negotiations. 

Honda, the larger company, had the upper hand from the beginning. In their joint statement announcing the start of merger talks, the two companies revealed that Honda would nominate the head of the merged company, and appoint the majority of its board members. 

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As talks progressed, Honda’s position reportedly shifted to making its smaller competitor a subsidiary. Nissan, on the other hand, preferred a joint holding company. (Mitsubishi Motors, which has Nissan as a major shareholder, decided to turn down the merger in late January, according to the Yomiuri, a Japanese newspaper.)

Shares in Honda and Nissan have swung wildly this week. Both Honda and Nissan plunged on Monday following Washington’s threat to impose tariffs on Mexico, only to pare back losses the following day when Trump delayed the new taxes by 30 days. (Both companies have plants in the U.S.’s southern neighbor.)

Then shares oscillated back and forth as details from the talks leaked to the press. As of Thursday, both Honda and Nissan shares are down 2% for the week so far. 

Honda and Nissan did not respond to Fortune’s requests for comment, made outside regular U.S. business hours.

Why did Honda and Nissan consider merging?

Foreign automakers that once dominated China are now struggling to keep up with EV manufacturers like Tesla and BYD. Honda and Nissan, like many of their peers, failed to pivot to EV models that appealed to Chinese consumers. Honda has paused production at some of its China plants and cut jobs as it tries to shift to selling more EVs. Nissan has gone further, closing one of its newest China-based plants in mid-2024. 

Between the months of April and September 2024, Honda’s and Nissan’s China sales declined by 37.6% and 14.4% respectively. 

A merger wouldn’t necessarily have solved Honda’s and Nissan’s EV struggles. “Both companies lack compelling EV offerings, and the combined entity would still face the new challenge of building a new EV pipeline,” Morningstar senior equity analyst Vincent Sun wrote on Wednesday. 

Nissan reported a 94% drop in net income for the first half of its fiscal year, which began in April 2024. “Investors may get concerned about Nissan’s future” if the merger gets called off, Sun wrote on Wednesday. (Honda, in contrast, reported a 20% drop in profits over the same period.)

As its merger talks with Honda collapse, Nissan is reportedly already looking for a new partner. Bloomberg reports the Japanese carmaker is looking to partner with a technology company, preferably based in the U.S. 

Another option is Foxconn. The Taiwanese manufacturer is hoping to break into EVs, and has even hired a former Nissan executive to lead its new carmaking strategy. Foxconn was reportedly interested in taking a stake in Nissan in December, but ultimately held off as negotiations with Honda took over.