Tokyo (AFP) - Japanese auto giant Honda and its struggling rival Nissan agreed Monday to launch talks on a merger seen as a bid to catch up with Chinese rivals and Tesla on electric vehicles.

Their collaboration would create the world’s third largest automaker, expanding development of EVs and self-driving tech.

But Honda’s CEO insisted that it was not a bailout for Nissan, who last month announced thousands of job cuts and reported a 93 percent plunge in first-half net profit.

“This is not a rescue,” Toshihiro Mibe told reporters, stressing that one condition for the merger would be for Nissan to complete its so-called “turnaround” plan.

Lacklustre consumer spending and stiff competition in several markets is making life hard for many automakers.

Business has been especially tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles.

The two firms along with Mitsubishi Motors said they had signed a memorandum of understanding to start discussions on integrating their business under a new holding company.

Citing “dramatic changes in the environment surrounding both companies and the automotive industry”, a joint statement said the companies planned to list the holding company on the Tokyo Stock Exchange in August 2026.

It comes after reports said Taiwanese electronics behemoth Foxconn had unsuccessfully approached Nissan to acquire a majority share. It then asked Renault to sell its 35 percent stake in Nissan – a pursuit now said to have been put on hold.

- Unequal marriage -

China overtook Japan as the biggest vehicle exporter last year, helped by government support for EVs.

Honda and Nissan – Japan’s number two and three automakers after Toyota – already agreed in March to explore a strategic partnership on software and components for EVs among other technologies.

This partnership was joined by Mitsubishi Motors in August.

The companies want to seal their merger deal in June next year, but it is unlikely to be a marriage of equals.

Honda will nominate the president of the new holding company, whose board will be mostly made up of Honda executives, their statement said.

Nissan is a majority shareholder of Mitsubishi Motors, which “aims to reach its conclusion by the end of January 2025 on the participation or involvement in the business integration between Nissan and Honda,” it added.

Honda and Nissan’s partnership could include a manufacturing tie-up where they build vehicles at each other’s plants, local media said.

- ‘Panic mode’ -

Nissan chief Makoto Uchida praised Honda’s agility and ability to adapt as the industry shifts, praising the company as “a partner who can share the sense of crisis about the future”.

“As the business environment for automakers changes in the future, I believe we will not be able to get there unless we have the courage to change ourselves,” Uchida said.

Nissan has weathered a turbulent decade, including the 2018 arrest of former boss Carlos Ghosn, who later jumped bail and fled Japan concealed in a music equipment box.

Ghosn told reporters in Tokyo on Monday via video link from Lebanon, where he is at large, that turning to its arch-rival Honda showed that Nissan was in “panic mode”.

Although the two companies might be able to “find synergies for the future… I don’t see anything obvious into this partnership or this alliance”, Ghosn said.