Honda Motor and Nissan Motor have begun negotiations to merge to form the world’s third largest automaker group,amid growing competition in the automobile industry that is becoming increasingly focused on electric vehicles. 

Sources revealed that the two Japanese auto giants are discussing setting up a holding company.

Honda and Nissan agreed in March of this year to partner up to develop electronic vehicles. In August, Mitsubishi Motors joined the two to sign a strategic partnership. If they merge, the three auto manufacturers’ sales would together top 7 million vehicles, making it the third largest in the world. 

Honda Motor CEO Mibe Toshihiro told the media on December 18 that it is considering all possible options.

Nissan said in November that it would axe 9000 jobs in response to weak sales, and announced it would replace some of its executive committee members next month.

The company’s partnership with Honda could rebuild its business and improve management efficiency and prompt growth.