Nissan will call off merger talks with rival Honda, the Nikkei newspaper said, abandoning a tie-up that would have created the world’s No.3 automaker and raising questions about how it will drive a turnaround by itself.

Shares in Nissan slid more than 4% before trade was suspended by the Tokyo Stock Exchange following the report. Shares of Honda continued to trade and finished the day up more than 8%, in a sign of apparent investor relief that the deal had been scrapped.

Honda, Japan’s second-largest carmaker, and Nissan, its third-largest, last year said they were in discussions to merge and create the world’s third-largest automaker by sales, bulking up in an industry that faces a vast threat from China’s BYD and other electric vehicle (EV) entrants.

But the talks have been complicated by growing differences on both sides, according to two people familiar with the matter, both of whom declined to be identified because they were not authorized to speak to the media.

Reuters earlier reported that Nissan could call off the talks. As of late afternoon, its board was still meeting to decide on the course of action, a person with knowledge of the matter said.

Honda had sounded out Nissan about becoming a subsidiary, one of the people said, adding that such an arrangement was a departure from the spirit of discussions originally framed as a merger of equals.

Nissan and Honda said in separate statements that the Nikkei report was not based on information announced by the company and that it aimed to finalize its future direction by mid-February and would announce it at that time.

The development raises fresh questions about how hard-hit Nissan could ride out its latest crisis without external help. Nissan is in the middle of a turnaround plan, aiming to cut 9,000 employees and 20% of global capacity.

Honda, with a market value nearly five times bigger than Nissan, was increasingly worried about its smaller rival’s progress on the turnaround plan, said the other person.

The tie-up talks have coincided with the disruption posed by potential tariffs from U.S. President Donald Trump. Tariffs against Mexico would be more painful for Nissan than for Honda or Toyota, according to analysts.

“Investors may get concerned about Nissan’s future (and) turnaround,” said Morningstar analyst Vincent Sun.

Nissan has been hit harder than some other carmakers by the shift to EVs, having never fully recovered after years of crisis sparked by the arrest and ouster of former Chairman Carlos Ghosn in 2018.

“The news saying that Nissan did not want to be a Honda subsidiary appears to highlight that control was a contentious issue,” said Christopher Richter, senior Japan autos analyst at brokerage...