Honda and Nissan have announced plans to merge as the Japanese automakers struggle with competition from rival brands in the electric vehicle market. The two companies confirmed on Monday that they had signed a memorandum of understanding that would create the third largest car maker by sales,

A tie-up with Honda could help Nissan solve a big problem, car dealers said: It doesn't have any hybrids. A merger could fix that.

Facing extreme competitive pressure from the rise of Chinese EV makers, the Nos. 2 and 3 Japanese automakers turn to each other to build strength.

Japanese auto makers Honda and Nissan said they plan to merge as traditional car makers try to cope with falling sales, slumping share prices, and increased competition from electric-vehicle makers. Honda and Nissan signed a memorandum of understanding to explore synergies and integrate their businesses through establishing a joint holding company,

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

Japan's car makers have struggled to match their big rivals in electric vehicles (EVs) and are trying to cut costs. If the merger is finalised it could result in a company worth more than 50 billion dollars (£39.77bn) based on the market capitalisation of all three car makers.

Nissan and Honda have announced plans to merge by 2026 in a seismic shift for the Japanese auto industry. The two carmakers signed a memorandum of understanding that allows them to continue discussions about integration via a joint holding company,

The companies hope a merger can help them take on Tesla and Chinese EV producers amid an increasingly difficult environment for legacy automakers.