Honda and Nissan are understood to have held exploratory talks about a potential merger to help them compete against electric car makers, especially in China.
In March, the two Japanese automakers agreed to explore a strategic partnership for electric vehicles.
The companies responded to the BBC with identical statements, saying: “As announced in March this year, Honda and Nissan are exploring various possibilities for future cooperation, leveraging each other’s strengths.”
This comes at a time when many car brands face increasing competition as the industry shifts from petrol and diesel cars to electric cars, with production booming in China.
Honda and Nissan did not deny the story, which was first reported by the Japanese business newspaper Nikkei, but said it “was not announced by either company.”
It is understood that discussions are still in their early stages and there is no guarantee that an agreement will be reached.
“If there are any updates, we will inform our stakeholders in a timely manner,” they added.
The two companies are expected to officially confirm that they have held the talks early next week, according to Japanese television channel TBS.
Nissan declined to comment on Bloomberg's report that it had been contacted by Foxconn about the iPhone maker acquiring a controlling stake in the car company. Foxconn did not immediately respond to the BBC's request for comment.
A potential merger between the No. 2 and No. 3 companies in Japan's auto industry could be complicated for several reasons.
Any deal would likely be subject to intense political scrutiny in Japan because it could lead to significant job cuts. Nissan is also likely to face the break-up of its alliance with French car manufacturer Renault.
Honda and Nissan agreed in March to cooperate in their electric vehicle businesses, and in August they deepened their ties, agreeing to work together on batteries and other technologies.
In August, the two companies also announced Agreement with Mitsubishi Motors To discuss intelligence and electricity.
The Nikkei also reported that Nissan and Honda may eventually bring Mitsubishi into any potential partnership. Nissan is Mitsubishi's largest shareholder.
Nissan shares rose more than 23% in Tokyo on Wednesday. Honda shares fell by about 3%, while Mitsubishi shares jumped by about 20%.
“The idea that some of these small companies can survive and thrive is becoming more difficult, especially when you add to the complexity of all the additional Chinese manufacturers that have come in and are competing aggressively,” said Jessica Caldwell, an analyst at Edmunds.
“It is essential for survival, not only to survive, but also to endure the future.”
Honda and Nissan are losing market share in China, which accounted for nearly 70% of global electric vehicle sales in November.
The two brands combined global sales of 7.4 million vehicles in 2023, but are struggling to compete with cheaper electric car makers such as BYD, which saw its quarterly revenue rise, outperforming Tesla for the first time in October.
Jesper Kohl, of Japanese online trading platform operator Monex Group, asked whether a merger could make the companies more competitive.
“Is this really just a rearrangement of deck chairs on the Titanic, meaning neither Honda nor Nissan have any products or any technologies that global consumers want?”
“From that perspective, it's a good rescue, but it doesn't create a new national hero.”
Additional reporting by Peter Hoskins.
