Honda and Nissan are considering a merger to help compete in the EV market

Honda and Nissan are considering a merger amid an intense battle to capture the booming electric vehicle market, potentially building the world’s largest automaker by sales.

The Japanese auto giants revealed that they had signed a Memorandum of Understanding (MOU) on a possible business integration, along with smaller Nissan alliance member Mitsubishi Motors.

They said a partnership could potentially help them “maintain global competitiveness” and deliver “more attractive” products and services as the auto industry undergoes massive upheaval.

Honda and Nissan agreed in March to consider working together to develop EV technology, before deciding in early August to jointly research autonomous driving and share components for EVs such as batteries.

A merger between its longtime rivals — which are also Japan’s second and third largest automakers — and Mitsubishi would create a company with a market capitalization of more than $50 billion.

The companies say the deal would provide the standardization of vehicle platforms, which would reduce costs and create stronger products, the optimization of factories and the integration of research and development functions.

Makoto Uchida, CEO of Nissan, said: “I believe that by joining forces from both companies, we can deliver unparalleled value to customers around the world who value our respective brands.

“Together we can create a unique way for them to enjoy cars, one that no single company could achieve alone.”

Traditional automakers are struggling to compete with upstart electric vehicle makers, especially those from China, who dominate the fast-growing EV market.

Chinese EV companies have benefited from generous government subsidies, tax breaks and China’s access to crucial raw materials such as graphite and refined rare earths.

Shenzhen-based BYD overtook Elon Musk’s Tesla last year to become the world’s best-selling EV maker after selling more than 3 million cars.

Nissan’s Leaf car was the world’s most popular electric car in the early 2010s, but its popularity has waned due to increased competition, contributing to Nissan’s serious financial problems.

Last month the group announced it would cut 9,000 jobs and cut global production capacity by a fifth, as it posted a £47.2 million loss in the third quarter.

Shortly thereafter, Fitch Ratings downgraded Nissan’s credit outlook to “negative,” citing the company’s declining profits and weaker-than-expected performance in North America.

Honda also announced last month that first-half profits fell about 20 percent to $3.2 billion due to declining sales volumes in China.

Toshihiro Mibe, president of Honda, said: “Bringing together the resources including knowledge, talents and technologies that Honda and Nissan have developed in recent years is essential to overcome challenging environmental changes.”

The Sunday Times reported that Honda could make cars at Nissan’s prominent Sunderland factory as part of a tie-up after it halted all car production in Britain three years ago.