Honda Motor and Nissan Motor are set to negotiate a merger, marking a significant step toward strengthening their positions in the evolving global automotive market.

The two Japanese automakers aim to pool their technological expertise and business resources under a proposed holding company to compete more effectively against industry leaders like Tesla and emerging Chinese electric vehicle manufacturers.

Both companies are expected to sign a memorandum of understanding in the near future, laying the groundwork for the merger. Details such as the ownership structure and operational framework are yet to be finalized.

The alliance also envisions bringing Mitsubishi Motors, in which Nissan holds a 24% stake, into the fold at a later stage, creating a comprehensive partnership to tackle the challenges of the fast-changing automotive industry.