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.

TOKYO—Honda and Nissan said they planned to merge in 2026, a move that has won Japanese government backing to keep the nation’s status as a leader in car manufacturing. The companies said their boards formally approved the start of merger talks on Monday.