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.

According to Bloomberg, discussions between Honda and Nissan were kick started after Taiwanese iPhone producer Foxconn approached the latter about taking a possible stake.

Citing unnamed people familiar with the discussions, meanwhile, the Financial Times said talks between the two 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."

In a similar statement, Honda said the media reports “are not based on any announcement from the company”.

It continued: “As announced in March and August of this year, the company, Nissan and MMC combine the strengths of each company and are considering various possibilities for future collaboration, but no decisions have been made.”

The Mitsubishi Motors Corporation (MMC), Honda and Renault have a long-standing alliance.

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

Foxconn – formally known as Hon Hai Precision Industry Co – has yet to comment. Bloomberg said it was not known if Nissan had rebuffed Foxconn's approach or if talks were ongoing.