Even if the merger is off, Nissan remains keen on working with Honda in areas such as electric vehicles and software defined vehicles.

TOKYO — Nissan is set to call off merger talks with rival Honda, a source said Wednesday, abandoning a $60 billion-plus tie-up that would have created the world's No. 3 automaker and raising questions about how it will drive a turnaround by itself.

Two of Japan’s largest automakers have been in talks to combine their operations to form one of the world’s biggest car groups.

Nissan and Honda, both major automakers based in Japan, responded Wednesday to reports that a potential merger of the two companies could beat risk of being abandoned.

A proposed $58 billion merger to create the world’s fourth-largest carmaker appears on the verge of collapse after Honda made an unexpected proposal to turn Nissan into a fully owned subsidiary, according to three people familiar with the matter.

Negotiations between Nissan and Honda are reportedly shaky after the two Japanese automakers previously announced they would merge by 2026.

The pair are discussing various options, including the possibility of withdrawing from deal talks, according to statements.

Nissan's future reportedly became the sticking point in negotiations, with Honda pushing to make its smaller competitor a direct subsidiary.

Nissan CEO Makoto Uchida met with Honda counterpart Toshihiro Mibe on Thursday to say he wanted to end their merger talks after the larger automaker proposed making Nissan a subsidiary, said a source with knowledge of the matter.

After the failure of its planned merger with Honda in the electric vehicle sector, Nissan is now seeking a new partner to help it recover and maintain its position in the rapidly evolving automotive market,