Nissan Motor Co. is seeking a new partner as it prepares to end negotiations to form a joint holding company with Honda Motor Co., people familiar with the matter said.

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.

The Honda and Nissan merger that has recently been the talk of the automotive industry has all but hit a dead end according to sources. Over the past couple of months, both the car makers have been in