Nissan and Honda start merger talks to take on Tesla and create the world’s 3rd-largest car company

Nissan and Honda are aiming to finalize merger talks by the end of January.

Nissan and Honda, two of Japan’s largest car companies, have announced that they’re beginning merger talks.

The two automakers have agreed to continue discussions on building a “strategic partnership focused on intelligence and electrification,” a statement posted Monday on Nissan’s newsroom website said.

Nissan and Honda are looking to conclude the talks by the end of January.

A third company, Mitsubishi, also signed a memorandum of understanding, signaling its involvement in the merger talks.

It would be the largest domestic merger in Japanese automotive history and, if finalized, create the world’s third-largest automaker by sales.

The companies hope that a merger can help them better compete against Tesla and Chinese electric-vehicle makers.

Profits were down in the latest earnings reports for all three of Japan’s top auto companies — Toyota, Nissan, and Honda — with slumping sales in China a constant theme.

“At this time of change in the automobile industry, which is said to occur once every 100 years, we hope that Mitsubishi Motors’ participation in the business integration discussions of Nissan and Honda will lead to further social change,” Toshihiro Mibe, Honda’s CEO, said.

Japan’s stock market had closed for trading on Monday when the announcement was made. However, Honda’s New York-listed stock was up 13% in premarket trade Monday on the back of the news.

After news of the merger talks was reported last week, Nissan’s stock surged by nearly 24%.