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 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.

Nissan Motor Co. is pulling out of its deal with Honda Motor Co. to combine both brands and regain global competitiveness, the Nikkei newspaper reported Wednesday.