Japanese automakers Nissan and Honda on Monday announced they had entered into official talks to merge and create the world’s third-largest automaker by sales.

The proposed deal aims to unify operations under a joint holding company, led by Honda, while maintaining the distinct identities of each brand, according to Honda's president, Toshihiro Mibe. If finalized, the merger would position the combined entity to better compete with market leaders Toyota and Volkswagen.