The Japanese companies’ decision to call off negotiations highlights the challenges legacy automakers face in partnering to tackle new technologies.

Nissan Motor Co. ( OTCPK:NSANY) and Honda Motor ( NYSE: HMC) have called off talks on a deal that would have created the world's third-largest carmaker. The development was widely anticipated after discussions had stalled in recent weeks to break off any merger momentum.

Honda and Nissan initially said they were trying to finalize an agreement by June and set up the holding company by August. The three automakers will continue to work together on electric vehicles and smart cars, such as autonomous driving, they said Thursday.