Honda and Nissan begin talks about merging to form the world's third largest car company.

Japanese automakers Honda and Nissan announced on Monday the official start of merger talks to create the world's third-largest automotive company, a deal expected to combine the strengths of both companies to enhance their competitiveness, particularly in developing electric vehicles and smart driving technologies.

Honda and Nissan explained in a joint press conference today that a new holding company is to be formed, with Honda nominating most of the board members. The group resulting from the merger is expected to generate revenues of about 30 trillion yen (approximately 191.4 billion dollars) and operating profits exceeding 3 trillion yen.

Discussions regarding the merger deal between the two companies are expected to conclude by June of next year, as Japanese Mitsubishi – which also owns one of the largest automotive companies in Japan and is a strategic partner of Nissan – is considering joining the merger deal.

The companies aim through the anticipated merger to achieve economies of scale, protect their individual brands, and improve their market position against leading global competitors in the electric vehicle sector, such as American Tesla and Chinese BYD.

Honda, which has the stronger financial performance, is expected to contribute a larger share of the value of the merged entity, with a market value of about 43 billion dollars, while Nissan, which has been struggling financially and undergoing restructuring, needs to complete its transformation before moving forward with the merger.

The deal is likely to take effect in the long term, with no significant progress expected until 2030 or later. With the completion of the merger, the joint company is expected to surpass South Korea's Hyundai, making it the third-largest automotive company in global sales, following Japan's Toyota and Germany's Volkswagen.