Honda and Nissan are setting their sights on merging into the electric vehicle competition, according to a Nikkei report by Investing.com

Investment website — Honda (NYSE:) Motor and Nissan (OTC:) Motor are set to engage in discussions about a potential merger, aiming to pool resources to strengthen their positions in the electric vehicle market, it said Wednesday.

The two Japanese automakers are considering the possibility of working under a joint holding company, the report said, adding that a memorandum of understanding that will officially begin these negotiations is expected to be signed soon.

Details regarding their respective stakes in the newly proposed entity, along with other details, will be determined at a later stage, the report said.

This step represents a strategic response to the rapid development witnessed by the automotive industry, especially the electric car sector.

By joining forces, Honda and Nissan aim to better compete with Tesla (NASDAQ:) and Chinese electric vehicle producers, which currently hold a significant market share.

The decision to combine resources comes as automakers around the world grapple with the shift toward electric and self-driving cars, a trend that has been accelerated by growing environmental concerns and technological advances.

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