Japan’s Honda and Nissan join forces to create world’s third-largest carmaker

Japanese carmakers Honda and Nissan have announced plans to join forces, forming the world’s third-largest carmaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels, and aggressive competition from China forces legacy carmakers to rethink their business models.

The two companies said they had signed a memorandum of understanding on Monday, and that smaller Nissan alliance member Mitsubishi Motors also had agreed to join the talks on integrating their businesses.

“We anticipate that if this integration comes to fruition, we will be able to deliver even greater value to a wider customer base,” Nissan’s CEO Makoto Uchida said in a statement.

Carmakers in Japan have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time.

In China, the soaring popularity of locally made EVs has foreign brands fighting for survival, and Japanese carmakers there are stuck with too much capacity.

News of a possible merger surfaced earlier this month, with unconfirmed reports saying that the talks on closer collaboration partly were driven by aspirations of Taiwan iPhone maker Foxconn to tie up with Nissan, which has an alliance with Renault SA of France and Mitsubishi.