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.

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.

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.

Japan's Honda and Nissan have signed an initial pact to begin talks to explore a potential merger through the establishment of a joint holding company, a historic move in the automotive industry that could create the world's third biggest auto group after 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

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.