Nissan Motor Co., Ltd and Honda Motor Co., Ltd. will start discussions toward "business integration" through the establishment of a joint holding company, a move seen as a merger by industry observers.

According to a report from Reuters, Nissan and Honda are actually in talks to merge by 2026, a historic pivot for Japan's auto industry amid the threat Chinese electric vehicle (EV) makers now pose to the world's long-dominant legacy car makers.

Smaller Mitsubishi Motors, in which Nissan is top shareholder, was also considering to be part of the reported merger or integration. Mitsubishi would make a decision on the matter by the end of January.

"If the business integration can be realized, both companies can aim to integrate their respective management resources such as knowledge, human resources, and technologies; create deeper synergies; enhance the ability to respond to market changes; and expect to improve mid- to long-term corporate value," Honda and Nissan said in a statement.

"Additionally, Nissan and Honda can aim to further contribute to the development of Japan's industrial base as a 'leading global mobility company' by integrating Nissan and Honda's four-wheel-vehicle and Honda's motorcycle and power products businesses, enabling the brands of both companies to become more attractive and to deliver more attractive and innovative products and services to customers worldwide." they added.