Japan’s second- and third-largest automakers hope the $50 billion deal would help them catch up with Tesla and China’s BYD in electric vehicles and advanced software.

Once they find a common direction, Honda and Nissan will draw up a definitive agreement to merge, including a plan to transfer shares, by June 2025. If that goes through, they will seek to get plans approved by April 2026, with the merger happening later that year.

The potential merger could help boost the auto companies production of electric vehicles amid growing changes in the car industry.

Japanese automakers Nissan Motor Corp. and Honda Motor Co. have confirmed that they are discussing closer collaboration but denied reports they have decided on a merger

Actual details of the merger are thin, but the announcement by the brand makes clear that Honda would lead the new holding company under which the automakers would exist, with the automaker choosing the top executives.

The merger talks come amid competition from China in the auto industry and the increasing popularity of electric vehicles.

Honda Motor Co’s proposed acquisition of Nissan Motor Co could provide the scale needed to challenge China’s BYD Co, sales data revealed Wednesday. The move highlights mounting pressure on Japanese automakers to compete in a market increasingly dominated by China’s burgeoning automotive industry.