Here's what a blockbuster Nissan-Honda merger could mean for the auto industry

Top Japanese carmakers Nissan Motor and Honda Motor are understood to be exploring a blockbuster merger, as the two rival companies seek to stay competitive on the road to full electrification.

The prospective tie-up could create the world's third-largest auto group by vehicle sales, with 8 million sales annually, according to Citi. That would place Nissan-Honda-Mitsubishi behind fellow Japanese automakerThe merger report comes at a time when many auto giants are struggling to cope with increased global competition from bigger electric vehicle , makers such asA mega-merger, however, is expected to face several obstacles.

"My concerns would be that perhaps they have left it a bit late, that they don't have the current technology and set-up the right product to compete in their key markets," Wells said. "We think Honda needs to show how it will manage major and battery investments in Canada," Kishimoto said."This tie-up is not entirely unexpected because obviously they announced their partnership earlier this year," Lucinda Guthrie, executive editor at Mergermarket, told CNBC's"Street Signs Europe" on Wednesday.making an approach to Nissan.

"You have to bear in mind that this would have to come with the Japanese government's blessing because there is the potential for workforce cuts but then, how are the Japanese automakers going to compete with the low-cost vehicles from China?" Guthrie said.Nissan signage at a dealership in Richmond, California, US, on Friday, June 21, 2024.

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