Japan’s second- and third-largest automakers hope the $50 billion deal would help them catch up with Tesla and China’s BYD in electric vehicles and advanced software.

Once they find a common direction, Honda and Nissan will draw up a definitive agreement to merge, including a plan to transfer shares, by June 2025. If that goes through, they will seek to get plans approved by April 2026, with the merger happening later that year.

Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels

The potential merger could help boost the auto companies production of electric vehicles amid growing changes in the car industry.

The merger talks come amid competition from China in the auto industry and the increasing popularity of electric vehicles.

Both companies are grappling with intense global competition in the electric vehicle market from the likes of Tesla and China’s BYD.

Honda Motor Co’s proposed acquisition of Nissan Motor Co could provide the scale needed to challenge China’s BYD Co, sales data revealed Wednesday. The move highlights mounting pressure on Japanese automakers to compete in a market increasingly dominated by China’s burgeoning automotive industry.