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

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.

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.