The proposed deal aims to unify operations under a joint holding company, led by Honda, while maintaining the distinct identities of each brand, according to Honda's president, Toshihiro Mibe. If finalized, the merger would position the combined entity to better compete with market leaders Toyota and Volkswagen.

Nissan and Honda face increased pressure to compete in the EV market, with sales decreasing across China and the U.S. as Tesla and Chinese automaker BYD have rapidly expanded their production and sales growth, Nikkei reported. Shares of Nissan and Honda rose by 8% and 1.5%, respectively, following the report.