A high-level Japanese group, including a former prime minister, has drawn up plans for Elon Musk's Tesla to invest in the struggling carmaker Nissan, following the collapse of its merger talks with rival Honda, according to the Financial Times.

The new proposal, led by former Tesla board member Hiro Mizuno, is being supported by ex-premier Yoshihide Suga and his former aide Hiroto Izumi, according to three people with direct knowledge of the move. Several board members at Nissan are aware of the initiative.

The group is hopeful that Tesla will become a strategic investor, believing that the world's largest pure electric-vehicle maker is keen to acquire Nissan's plants in the US. These factories would help Tesla boost domestic manufacturing in response to Donald Trump's tariff threats.

Nissan shares rose as much as 11% in Tokyo on Friday after the Financial Times reported the plans.

The plan to approach Tesla comes after Nissan walked away from Honda's $58 billion merger proposal, raising fears that Japan's third-largest carmaker could fall into potentially hostile foreign hands, with iPhone assembler Foxconn, activists, and private equity groups circling.

Following the breakdown in negotiations this month, Foxconn confirmed its interest in acquiring Nissan shares to expand its EV manufacturing business.

The proposal envisions a consortium of investors, with Tesla as the largest backer, but also includes the possibility of a minority investment by Foxconn to prevent a full takeover by the Apple supplier.

In recent weeks, Nissan had begun its own search for a strategic partner in the tech industry, with some board members suggesting Tesla and Apple as ideal targets, according to two other people familiar with the matter. In November, it launched an emergency turnaround plan that included 9,000 job losses as it fell to a quarterly loss.

Nissan's Tennessee plant has been operating under full capacity. With a market capitalization of $1.1 trillion, Tesla is among the world's most valuable companies. Historically, it has not invested in car companies, and Musk is pivoting the company's focus and spending of its $36 billion in cash to autonomous driving and robotics.

But Tesla also wants to boost production in the US to offset the impact of President Donald Trump's threatened tariffs. The group assembles all of its vehicles sold in the US locally but sources some of its components from Mexico and other parts of the world.

Nissan has two assembly plants in Tennessee and Mississippi with a combined annual capacity of about 1 million vehicles but only produced 525,000 units there in 2024. As part of its restructuring, the company has announced plans to cut production capacity by 20 percent globally to address flagging sales. Last week, it said it planned to cut shifts at the two US plants.

Nissan may not easily accept a sale of the US plants to a rival, given the local market is a key growth area for profits.

Since Foxconn's interest in Nissan came to light in recent months, officials at Japan's Ministry of Economy, Trade and Industry have been deeply concerned about the political implications and robustness of its national security screening process to handle Foxconn, which is seen as too close to China.

In an interview on Thursday, its chief executive Luca de Meo said any proposal needed to reflect the value created through the 25-year-old partnership. "I just hope that the Nissan management team finds a way to make it work better than it has worked so far," he said. "I give them all the support that they will need."