Honda and Nissan are understood to have held exploratory talks about a potential union to assist them compete against electric vehicle (EV) makers, particularly in China.

The discussions are in the early stages and there is no guarantee that a deal will be agreed, BBC information understands.

In March, the two Japanese car makers agreed to explore a strategic collaboration for EVs.

The firms responded to the BBC with identical statements, which said: “As announced in March of this year, Honda and Nissan are exploring various possibilities for upcoming collaboration, leveraging each other’s strengths.”

Honda and Nissan have not denied the narrative, which was first reported by Japanese business newspaper the Nikkei, but said it was “not something that has been announced by either corporation”.

“If there are any updates, we will inform our stakeholders at the appropriate period,” they added.

The two companies are expected to officially confirm that they have held the talks as early as next week, according to Japanese TV channel TBS.

Nissan declined to comment on a Bloomberg update that it had been approached by Foxconn about the iPhone maker taking a controlling stake in the car firm. Foxconn did not immediately respond to a BBC request for comment.

A potential union between Japan’s number two and number three car manufacturers could be complicated for several reasons.

Any deal is likely to arrive under intense political scrutiny in Japan as it may navigator to major job cuts. Nissan is also likely to be faced with unwinding its alliance with French vehicle manufacturer Renault.

Honda and Nissan agreed in March to cooperate in their EV businesses, and in August deepened their ties, agreeing to work together on batteries and other technology.

In August, the two companies also announced an agreement with Mitsubishi Motors to discuss intelligence and electrification.

The Nikkei also reported that Nissan and Honda may eventually bring Mitsubishi into any potential collaboration. Nissan is Mitsubishi’s biggest shareholder.

Nissan shares rose more than 23% in Tokyo on Wednesday. Honda shares fell about 3%, while Mitsubishi’s jumped by almost 20%.

The talks arrive as many car brands grapple with growing competition as the industry shifts from petrol and diesel vehicles to electric, with production in China booming.

“The thought that some of these smaller players can survive and thrive is getting more challenging, especially when you add on the complexity of all the additional Chinese manufacturers who have arrive in and are competing quite strongly,” said Edmunds analyst Jessica Caldwell.

“It’s just sort of essential to survive, not only to survive, but also just to afford the upcoming.”

Honda and Nissan have been losing trade distribute in China, which accounted for almost 70% of global EV sales in November.

The two brands had combined global sales of 7.4 million vehicles in 2023, but are struggling to compete with cheaper EV makers such as BYD, which has seen its quarterly revenues soar, beating Tesla’s for the first period in October.

Jesper Koll, from Japanese online buying and selling platform operator Monex throng, questioned whether a union could make the companies more competitive.

“Is this really just rearranging the deck chairs on the Titanic in the sense that neither Honda nor Nissan really have any products or any technologies that global consumers desire?”

“From that perspective, it’s a enjoyable rescue but it’s not creating a recent national champion.”

Additional reporting by Peter Hoskins.