Japanese automakers Nissan and Honda have announced plans for a merger that would catapult them to a top position in an industry that's in flux as it transitions away from its reliance on fossil fuels.

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.

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