As China continues its dominance over the global market, EVs continue to play a central role in changing the business and global economies slow down, Honda and Nissan have announced plans to merge, according to AP.

The resultant company would be world’s third-largest automaker by sales, according to the report. On Monday the two companies announced they had signed a memorandum of understanding to integrate their businesses, with Mitsubishi Motors also joining the discussions.

Facing competition from EV leaders like Tesla and China's BYD, Japanese automakers are uniting to cut costs and accelerate their transition to electric vehicles.

Honda's president, Toshihiro Mibe, stated the companies plan to form a joint holding company, maintaining their brands while Honda leads management. A merger agreement is targeted for June, with the holding company expected to list on the Tokyo Stock Exchange by August 2026.

There is still to study and discuss, Mibe said. He commented: “Frankly speaking, the possibility of this not being implemented is not zero.”

“We have come to the realization that in order for both parties to be leaders in this mobility transformation, it is necessary to make a more bold change than a collaboration in specific areas,” he added. 

AP writes that a potential merger between Honda, Nissan, and Mitsubishi could create an automotive giant valued at over $50 billion, helping them compete with industry leaders like Toyota and Volkswagen.

Toyota, which collaborates with Mazda and Subaru, produced 11.5 million vehicles in 2023, far surpassing the combined output of the three companies, which totaled about 8 million vehicles that year.

Reports earlier this month suggested Taiwan’s Foxconn was interested in acquiring Nissan shares from Renault, but Nissan CEO Makoto Uchida denied any direct approach from Foxconn, acknowledging the company's “severe” situation.

Speculation had previously linked Foxconn to Nissan shares, but CEO Makoto Uchida denied contact and acknowledged Nissan’s financial struggles, the AP report says. 

The merger aims to strengthen EV and software efforts, addressing global market shifts. Nissan, recovering from scandals and recent losses, has cut jobs and restructured under Uchida. Analysts highlight Honda’s potential benefits, including access to Nissan’s SUVs and EV expertise.