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

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.

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