Bangkok. Japanese automakers Nissan Motor Corp. and Honda Motor Co. confirmed Wednesday they are discussing closer collaboration, but denied reports suggesting they had decided to merge.

Nissan's stock price surged more than 22 percent in Tokyo after reports citing unnamed sources claimed a potential merger with Honda could create the world’s third-largest automaker group. Meanwhile, Honda's share price fell as much as 3 percent.

The reports also indicated that Mitsubishi Motors Corp., a member of the Nissan alliance, was part of the talks.

Earlier this year, the three automakers announced plans to share components for electric vehicles, including batteries, and jointly research software for autonomous driving to better adapt to the industry’s shift toward electrification. A preliminary agreement between Honda, Japan's second-largest automaker, and Nissan, the third-largest, was announced in March.

Trading in Nissan shares was briefly suspended but resumed after both companies issued a joint statement emphasizing that they are "considering various possibilities for future collaboration, but no decisions have been made."

A merger could create a behemoth valued at about $55 billion, based on the market capitalization of all three companies. The move would allow Nissan and Honda to scale up and better compete with Japan’s market leader, Toyota Motor Corp., and Germany’s Volkswagen AG.

Nissan, which has an alliance with Renault SA that is currently under review, announced plans last month to cut 9,000 jobs, or about 6 percent of its global workforce, and reduce its global production capacity by 20 percent. This followed a quarterly loss of 9.3 billion yen ($61 million).

Earlier this month, the company reshuffled its management, with CEO Makoto Uchida taking a 50 percent pay cut to take responsibility for the financial troubles. He stated that Nissan must become more efficient to better respond to market demands, rising costs, and other global challenges.

Honda reported a nearly 20 percent drop in profits for the first half of the April-March fiscal year, partly due to declining sales in China.

As the rise of Chinese automakers disrupts the industry, manufacturers are under pressure to shift from fossil fuel-powered vehicles to electric models.

Toyota produced 11.5 million vehicles in 2023, while Honda made 4.2 million and Nissan 3.4 million. Mitsubishi Motors produced just over 1 million vehicles. Even if a merger occurred, Toyota would remain the largest Japanese automaker.

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