Japanese auto giant Honda and its struggling rival Nissan agreed Monday to launch talks on a merger seen as a bid to catch up with Chinese rivals and Tesla on electric vehicles.

Their collaboration would create the world’s third-largest automaker, expanding the development of EVs and self-driving tech.

But Honda’s CEO insisted that it was not a bailout for Nissan, who last month announced thousands of job cuts and reported a 93 percent plunge in first-half net profit.

“This is not a rescue,” Toshihiro Mibe told reporters, stressing that one condition for the merger would be for Nissan to complete its so-called “turnaround” plan.

Lackluster consumer spending and stiff competition in several markets is making life hard for many automakers.

Business has been especially tough for foreign brands in China, where electric vehicle manufacturers such as BYD are leading the way as demand grows for less polluting vehicles.

The two firms, along with Mitsubishi Motors, said they had signed a memorandum of understanding to start discussions on integrating their business under a new holding company.

Citing “dramatic changes in the environment surrounding both companies and the automotive industry,” a joint statement said the companies planned to list the holding company on the Tokyo Stock Exchange in August 2026.