Nissan and Honda are in the final stages of preparing for a merger, aiming to become the third-largest automobile manufacturer.

Nissan and Honda are in the final stages of preparing for a merger, which will create the third-largest automobile manufacturer in the world. The merger is driven by the fierce competition in the new energy vehicle market, especially the tough challenge posed by China, which has forced Japan’s second and third-largest automakers to consider merging.

According to a Reuters report, the two companies are negotiating to create a holding company. Mitsubishi Motors, in which Nissan holds a 24% stake, may also be involved in this process.

If Nissan and Honda merge into a single company, it will become the third-largest automaker in the world based on vehicle sales. The combined company will be worth $54 billion and produce 7.4 million vehicles annually. Currently, Toyota is the largest automaker in the world, followed by Volkswagen in second place.

Japanese companies have not yet produced a significant number of electric vehicles, which is one of the reasons why Japan’s automotive industry faces a challenging future as the global automotive market shifts towards electric vehicles.

Last month, Nissan announced a plan to save $2.6 billion. To achieve this, the company will cut 9,000 jobs and reduce production by 20%. This decision comes after a decline in Nissan’s sales in the U.S. and China.