Japanese automakers Honda and Nissan have announced plans to join forces, forming world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.

Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.

The potential merger could help boost the auto companies production of electric vehicles amid growing changes in the car industry.

The proposed deal aims to unify operations under a joint holding company, led by Honda, while maintaining the distinct identities of each brand, according to Honda's president, Toshihiro Mibe. If finalized, the merger would position the combined entity to better compete with market leaders Toyota and Volkswagen.

Nissan and Honda agreed to consider a merger and set up a joint holding company, which would create the world's third-largest automaker.

The merger talks come amid competition from China in the auto industry and the increasing popularity of electric vehicles.

Japanese automakers Honda and Nissan have announced plans to work toward a merger that would form the world’s third-largest automaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels.

Honda and Nissan plan to merge as the two Japanese firms seek to fight back against competition from the Chinese car industry. Joining forces would create one of the world's biggest car producers alongside Toyota,

Analysts questioned the timing of the Honda-Nissan potential deal amid intense competition from Chinese rivals, reported the news agency Reuters.

Honda’s potential acquisition of Nissan could help the two Japanese brands improve their competitive stance against China’s BYD in the global car market. Struggling individually, Honda and Nissan sold 3.