Japanese carmakers Honda and Nissan will begin negotiations over a potential merger, according to reports.
The Nikkei financial newspaper said on Tuesday that the two Japanese companies would start talks to help combat the increased global competition from bigger electric vehicle makers.
The firms, which are the second- and third-largest car manufacturers in Japan, had combined vehicle sales of 7.4m vehicles in 2023 but are having to compete with soaring sales from Chinese rivals such as BYD and Li Auto.
Nissan shares soared more than 20% in early trade on Wednesday.
A Honda spokesperson said a potential merger was among the possibilities being discussed. “We are discussing possibilities for cooperation between Honda and Nissan in the future, in a wide range of fields and in various areas, and those possibilities include the latest reports, but there is nothing decided,” the spokesperson told AFP.
Both companies have forged stronger ties in recent months and in March decided to join forces and work together on developing EV technology.
At the time, the Nissan chief executive, Makoto Uchida, said: “Emerging players are very aggressive and are making inroads at incredible speed. We cannot win the competition as long as we stick to conventional wisdom and a traditional approach.”
The Nikkei said the two carmakers were looking to operate under a single holding but the stakes each would hold in the new entity, along with other details, are to be decided later.
Mitsubishi Motors, where Nissan is the biggest shareholder with a 24% stake, is also likely to be brought under the holding company.
Any deal could be the biggest in the industry since the $52bn (£40.9bn) merger between Fiat Chrysler and PSA in 2021 to create Stellantis, one of the world’s largest auto groups with brands such as Jeep, Dodge, Maserati, Peugeot and Citroën.
It comes amid falling profits for a number of large automakers in Europe as they struggle with slower demand and intense competition, while also investing in the switch from petrol and diesel production to electric.
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Last month, Stellantis announced it would be closing its Luton plant, putting 1,100 jobs at risk, blaming the state of the UK economy and the government’s zero-emission vehicle (ZEV) mandate.
Ford also announced in November it would cut 4,000 jobs in Europe, including 800 in the UK, while Volkswagen is preparing to close three factories in Germany, the first time it has shut plants in the country.
Nissan said in a statement: “The content of the report is not something that has been announced by either companies. As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths. If there are any updates, we will inform our stakeholders at the appropriate time.”