Japanese auto giants Honda and Nissan on Monday agreed to launch talks on a merger seen as a bid to catch up with Chinese rivals and Tesla on electric vehicles.

Honda and Nissan have announced plans to merge as the Japanese automakers struggle with competition from rival brands in the electric vehicle market. The two companies confirmed on Monday that they had signed a memorandum of understanding that would create the third largest car maker by sales,

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.