Honda and Nissan are reportedly in talks to create a holding company, fueling speculations that the two Japanese auto giants are eyeing a merger.

First reported by the Nikkei newspaper in Japan, the two companies forming a holding firm will enable them to cooperate more closely on technology at a time when the industry is being rewritten by the likes of Tesla, Reuters reported. 

"As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths," the companies said in separate statements.

Stakeholders of the two auto giants are expected to be informed of any updates at the appropriate time

According to reports, Honda's market capitalization is $38.8 billion, while Nissan's is $7.6 billion. Hence, a merger between the two auto giant will be the biggest since the $52-billion merger between Fiat Chrysler and PSA in 2021, creating Stellantis.

At present, car firms that have built their markets on cars with internal combustion engines are facing challenges from electric vehcile firms like Tesla and China's BYD, among many others. 

In March this year, Nissan and Honda signed a memorandum of understanding under which they will begin a feasibility study of a strategic partnership in the fields of vehicle electrification and intelligence.

"To further accelerate efforts toward carbon neutrality and zero traffic-accident fatalities, it will be essential to strengthen environmental and electrification technologies as well as software development. The two companies have reached the understanding based on the belief that it is necessary to combine their strengths and explore the possibility of future collaboration," the two firms said in a statement.

NISSAN PHOTO