Honda's CEO said it was "difficult" to explain why Nissan would make a good business partner. Analysts believe that Honda's ideal partner for a merger would be a more "healthy and financially sound company.

The Detroit Three are facing an auto industry increasingly affected by the rise of China as demonstrated by the planned merger of Honda and Nissan.

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.

Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.

Facing extreme competitive pressure from the rise of Chinese EV makers, the Nos. 2 and 3 Japanese automakers turn to each other to build strength.

Honda's shares went up by as much 17% when local markets opened on Tuesday.

Japanese automakers Nissan and Honda have announced plans for a merger that would catapult them to a top position in an industry that's in flux as it transitions away from its reliance on fossil fuels.

Nissan and Honda agreed to consider a merger and set up a joint holding company, which would create the world's third-largest automaker.

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

Japanese automakers Honda and Nissan have announced plans to join forces, forming world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.