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.

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

Japan’s second- and third-largest automakers hope the $50 billion deal would help them catch up with Tesla and China’s BYD in electric vehicles and advanced software.

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.

Both companies are grappling with intense global competition in the electric vehicle market from the likes of Tesla and China’s BYD.

Japanese automakers Honda Motor Co. and Nissan Motor Corp. announced Monday their intention to merge by 2026 and create the world’s third-largest car-making operation by sales.

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

The Japanese car giants say the proposed merger would give them the scale to better compete on the global market.

A potential merger between Honda Motor and Nissan grabbed investor attention as Honda's stocks rose on Monday. Japanese automotive titans Honda and Nissan are working on a potential merger that would create the world's third-largest automaker as the global industry races to adapt to the electric vehicle (EV) revolution.