Honda and Nissan, Japans second- and third-largest automakers, are holding merger talks to create a structure that would enable them to better withstand fierce competition from the likes of Tesla and Chinese electric vehicle (EV) rivals, according to reports.

News agency Nikkei first reported that the two companies were holding merger talks to determine how they could cooperate more closely on technology. According to Reuters, the talks aim to set up an umbrella holding company and not necessarily merging the two companies together.

Recommended Videos Mitsubishi, which Nissan has a 24% stake in, is also considered to be included in the partnership.

Please enable Javascript to view this content Whats for sure is that the two automakers have stepped up their cooperation in recent months as they seek a common strategy to address a fast-changing EV landscape.

Related Both Honda and Nissan separately issued a statement confirming this much. As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each others strengths, the statement says.

Analysts believe Hondas strengths in developing powertrains, notably for hybrids, could combine with Nissans experience in electric vehicles, which goes back to the LEAF in 2010.

The two automakers partnership has been centering on technology for EVs, including components and software.

What started as an alliance to face intense price competition from the likes of Chinas BYD only intensified through the year as the global auto industry also recorded slowing sales in Europe and the U.S.

In addition, the industry is now facing the potential reversal of pro-EV policies in the U.S. with the incoming administration of President-elect Donald Trump.

The merger might also face scrutiny from the Trump administration, which has taken an aggressive stance on imported vehicles, including threats to impose steep tariffs.

A Honda/Nissan merger would yield one of the largest auto groups in the world, with combined sales of about 8 million.

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