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,

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.

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

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

A potential merger between Honda Motor and Nissan grabbed investor attention as Honda's stocks rose on Monday. Japanese automotive titans Honda and Nissan are working on a potential merger that would create the world's third-largest automaker as the global industry races to adapt to the electric vehicle (EV) revolution.

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.