Honda and Nissan are in talks to merge by 2026, they said on Monday, a historic pivot for Japan's auto industry that underlines the threat Chinese EV makers now pose to the world's long-dominant legacy car makers.

Japan's Honda and Nissan said Monday they had embarked on formal merger talks that would create the third-largest car manufacturer globally with sales of as much as $191.4 billion and more than $19 billion profit.

Japanese automakers Nissan and Honda have announced plans to work toward a merger that would catapult them to a top position in an industry in the midst of tectonic shifts as it transitions away from reliance on fossil fuels.