This photo taken on Dec. 23, 2024 shows a Honda dealer in Tokyo, Japan. [Photo/Xinhua]

Japanese automakers Honda Motor and Nissan Motor announced Monday they have agreed to begin talks on a merger that would establish a new holding company by around August 2026, as the global auto industry's competition in electrification and software integration intensifies.

The two companies signed a memorandum of understanding to start discussions toward a business integration under a new holding company, creating the world's third-largest automaker group to compete with U.S. and Chinese rivals in the electric vehicle market.

"The business environment for both companies and the wider automotive industry has rapidly changed," Honda and Nissan said in a joint statement, "and the speed of technological innovation has continued to accelerate."

"To lead the mobility transformation, we've come to think that we need something bolder than just cooperation in some specific fields," Honda President and CEO Toshihiro Mibe said during a joint press conference with his counterparts from Nissan, "We have reconfirmed that a merger would create synergies in all kinds of fields."

Honda and Nissan, Japan's second- and third-largest automakers by volume, respectively, aim to wrap up negotiations on the terms of their merger by June 2025, while Mitsubishi Motors, Nissan's partner, will decide by the end of January 2025 whether to join the merger, the automakers said.

Before Monday's merger talks kicked off, the Japanese companies already agreed in March this year to commence a feasibility study on a strategic partnership in EV production and software technologies to cut costs and improve competitiveness, with Mitsubishi Motors joining the talks in August. 

This photo taken on Dec. 23, 2024 shows a Nissan dealer in Tokyo, Japan. [Photo/Xinhua]