Honda and Nissan have announced plans for a potential merger, which aims to create the world’s third-largest automaker by production volume.

This consolidation could help the companies better compete against global automakers like Volkswagen and Toyota in the rapidly evolving electric vehicle market.

The companies revealed Monday they signed a memorandum of understanding to explore integrating their operations, with Mitsubishi Motors also joining the discussions.

The merger agreement is expected to be finalized by June 2025, with a completion target of August 2026.

The announcement comes as Japanese automakers aim to remain competitive against international rivals during the transition away from fossil fuels.