Japanese automotive giants Honda and Nissan are in discussions about a potential merger, marking a significant move for two of the country’s most prominent carmakers, both of which have been grappling with challenges in recent years. The companies confirmed the talks in a joint statement on Tuesday, though they refrained from offering specifics on the details or the potential timeline of the deal.

According to media reports, the merger discussions come at a time when both Honda and Nissan have been facing heightened competition and market struggles. While the companies emphasized that they are exploring various avenues for collaboration, they did not clarify whether a full merger or some form of joint venture would emerge from these talks.

“As announced in March, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths,” the companies said in the statement. “If there are any updates, we will inform our stakeholders at the appropriate time.”

The talks represent the latest phase in a partnership that began earlier this year. In March, the two carmakers revealed plans to collaborate on electric vehicles (EVs), with a particular focus on the development and production of environmentally friendly cars. In August, they expanded their cooperation to include battery technology, recognizing the critical role energy storage plays in the transition to electric mobility. The proposed merger could be the next step in an evolving partnership aimed at securing their positions in a rapidly shifting global automotive market.

The potential tie-up comes as both Honda and Nissan face considerable headwinds. Like many non-Chinese automakers, they have struggled to maintain market share in China. Once a stronghold for foreign brands, the Chinese market has increasingly tilted in favor of domestic companies specializing in electric vehicles such as BYD. Foreign automakers like Honda and Nissan have found it difficult to compete on price and technology with Chinese government incentives spurring domestic EV adoption.

Despite Nissan’s pioneering role in EV technology with its Leaf model, the company has been overtaken by more affordable and advanced Chinese competitors. This struggle is compounded by internal turbulence. In recent months, Nissan has reported a sharp 90% drop in operating income between March and September.

Honda, while larger than Nissan, is also grappling with its own difficulties. The company has pledged to shift to producing only zero-emission vehicles by 2040, but the transition has been slower than expected. In markets like the United States and Europe, relatively low gasoline prices, insufficient EV charging infrastructure, and fierce competition have hindered demand for electric cars.