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.

Both companies are grappling with intense global competition in the electric vehicle market from the likes of Tesla and China’s BYD.

The merger talks come amid competition from China in the auto industry and the increasing popularity of electric vehicles.