Japanese automakers Honda and Nissan have confirmed preliminary discussions about a possible merger, a move that could reshape the global automotive landscape.

The two companies released a joint statement on Tuesday acknowledging the talks, which were first reported by the Nikkei. While details remain scarce, Honda and Nissan emphasized their commitment to leveraging mutual strengths. "As announced in March, Honda and Nissan are exploring various possibilities for future collaboration," the companies stated. They added that stakeholders would be updated when appropriate.

The discussions also involve Mitsubishi Motors, raising the prospect of a partnership among three of Japan's largest automakers. While Honda and Nissan have confirmed Mitsubishi's involvement, the latter has yet to comment.

Honda and Nissan have previously collaborated on electric vehicle (EV) initiatives, including battery technology. However, their joint efforts have come at a time of significant market upheaval. Both companies face declining sales in China, the world's largest car market, where local brands like BYD have eclipsed their technology and offer lower prices. Despite being pioneers in EV development, including Nissan's early success with the Leaf, Japanese automakers are struggling to keep pace with aggressive competition and shifting consumer preferences in China.

Challenges are not limited to China. In the US and European markets, the adoption of EVs has been hampered by low fuel prices, inadequate charging infrastructure, and intensifying competition. Honda, which plans to transition to zero-emission vehicles in major markets by 2040, has faced slow progress in meeting its sustainability targets.

Nissan's woes have been exacerbated by the fallout from the arrest and subsequent flight of its former CEO, Carlos Ghosn, in 2018. Ghosn's departure strained the long-standing Renault-Nissan-Mitsubishi alliance, once the largest automotive partnership globally. Renault's decision to reduce its stake in Nissan further destabilized the partnership.

The financial impact on Nissan has been stark. Between March and September this year, the company reported a 90% decline in operating income compared to the same period last year. Honda, although larger, has also faced mounting pressure to innovate in an increasingly competitive market.

If successful, a merger among Honda, Nissan, and Mitsubishi could create a formidable alliance in the global automotive sector, pooling resources to address technological and market challenges. However, significant hurdles remain, including aligning corporate cultures and operational strategies across the three companies.