Honda Motor and Nissan Motor are reportedly preparing to merge, with negotiations expected to begin soon, according to Japanese media.
The report, first published by the Nikkei newspaper on Tuesday, highlights challenges both automakers face in competing with global EV giants like Tesla and BYD.
So far, neither Honda nor Nissan has confirmed the merger plans. Both companies released similar statements denying the report on Tuesday.
"As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths," the companies said separately.
Honda and Nissan rank as Japan’s second and third-largest car manufacturers, trailing behind Toyota in the top spot.
Their market values differ significantly, with Honda valued at approximately 5.95 trillion yen ($38.8 billion) and Nissan at 1.17 trillion yen ($7.6 billion).
Last November, Nissan slashed 9,000 jobs globally, cutting its production capacity by 20% as part of major layoffs.
The company stated it was "facing a severe situation" and aimed for "healthy growth" by reducing fixed costs by 300 billion yen ($1.9 billion) and variable costs by 100 billion yen ($649 million).
"The company is implementing various measures to lower selling, general, and administrative expenses, decrease the cost of goods sold, rationalize its asset portfolio, and prioritize capital expenditures and investments in research and development," Nissan explained at the time.