Honda and Nissan exploring mega merger amid EV uncertainty - report

The tie-up, should it go ahead, would create the world’s third-largest carmaker behind Toyota and Volkswagen, based on sales volumes, with a value of around $52bn company.

Citing unnamed people familiar with the discussions, the Financial Times said talks were at an early stage. It also flagged potential political opposition to the deal, which would likely lead to significant job cuts.

However, shares in Nissan surged 24% on the reports, on expectations a tie-up would include a premium on the business. In contrast, Honda’s stock eased 3%.

Car firms are struggling with slower-than-expected demand for electric vehicles alongside stiff competition from fast-growing Chinese manufacturers.

It is also not clear what impact president elect Donald Trump, a vocal supporter of tariffs, will have on the global car industry.

Last month Nissan unveiled a major turnaround programme, including axing 9,000 jobs and cutting global production capacity.

Talks between the two companies - which in March announced a partnership to develop electric vehicles together - were first reported by Japan’s Nikkei newspaper.

In response, Nissan said the contents of the Nikkei article were "not something that has been announced by either company".

It continued: "As announced in March this year, Honda and Nissan are exploring possibilities for future collaboration, leveraging each other’s strengths.

"If there are any updates, we will inform our stakeholders at the appropriate time."

Honda also noted that it and Nissan were "exploring various possibilities for future collaboration".

France’s Renault, which has a cross-shareholding structure with Nissan, declined to comment on the reports.