Honda and Nissan have strong presences in major markets like North America, Europe, and Japan. However, they are struggling in China. “Both Honda and Nissan have significant overcapacity issues in China, which requires optimization before any merger talks, James Hong, an analyst at Macquarie Securities Korea Ltd., said.

Honda has worked with GM in a series of collaborations that did not involve any exchange of corporate equity. In 1993, GM controlled Isuzu and signed a deal to supply its Rodeo to become Honda’s first SUV,

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 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.

Speculation about a potential Honda and Nissan merger began earlier this month, and the two companies confirmed the official start of talks Monday.

Honda's shares went up by as much 17% when local markets opened on Tuesday.

Japanese automakers Nissan and Honda have announced plans for a merger that would catapult them to a top position in an industry that's in flux as it transitions away from its reliance on fossil fuels.

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

"It's not a pragmatic deal because frankly, the synergies between the two companies are difficult to find," Ghosn told Bloomberg.

"Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future,” said Nissan Director, President, CEO, and Representati