TOKYO (AP) — Japanese automakers Honda and Nissan have announced plans to work toward a merger that would form the world’s third-largest automaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels.

Nissan and Honda agreed to consider a merger and set up a joint holding company, which would create the world's third-largest automaker.

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.