Nissan and Honda are in exploratory talks about a merger of the two carmakers that would create a $52 billion Japanese behemoth, people briefed on the matter said.

The two companies are studying a way to combine that would help them compete better at a time when traditional carmakers are battling fast-growing Chinese electric-vehicle makers, and slower-than-expected consumer demand for EVs. is

Nissan shares rose more than 22 percent in early trading in Tokyo on Wednesday, on expectations that a deal would give the company a healthy premium. Honda stock fell as much as 3 percent.

Talks are at an early stage, and there are concerns about a possible political backlash in Japan as the merger of the country's two most storied car brands could result in significant job cuts, one of the people familiar with the discussions said.

the nissan And Honda announced in March that they would team up to develop EVs and deepened their talks amid uncertainty about what Donald Trump's return as US president would mean for the car industry.

Before Wednesday shares of Nissan, which has a cross-shareholding structure with Renault, had fallen 40 percent this year, reducing its market capitalization to $8.2 billion. Honda's market value is $44 billion.

The combined company would rank as the world's third-largest carmaker behind Toyota and Volkswagen based on last year's sales volume, giving it the scale to invest to compete with Tesla and China's BYD.

Nissan unveiled an emergency turnaround plan in November that included 9,000 job lossessaid that this would reduce global production capacity by 20 percent. The company cut its profit guidance for the second time this year after falling into a loss in the July to September quarter.

Nissan is looking for one Anchor investor For several months, and the Financial Times reported last month “All optionswere being considered, including a merger with Honda.

The merger talks between Nissan and Honda were first reported by Nikkei. On Tuesday evening Nissan said: “The content of [Nikkei] The report is not something announced by any company.

It added: “As announced in March this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other's strengths. If there is an update, we will notify our stakeholders at the appropriate time.

Honda similarly said it and Nissan are "exploring a number of possibilities for future collaboration".

Renault declined to comment.

Fund managers in Tokyo said they would be highly skeptical of any merger, given the overlap between Nissan and Honda's businesses and the potential for major layoffs and writedowns.

"It's hard to imagine that Honda would do this without some kind of subsidy or guarantee from the Japanese government, because it's hard to identify which bits of Honda Honda will really want," said the head of a large, long-term fund.

In August, Honda and Nissan said they would roll out an EV by the end of the decade, as the two companies agreed to jointly develop software.

A merger between Nissan and Honda would give the company a major U.S. manufacturing footprint, helping both brands potentially cushion the impact of tariffs that Trump is proposing on imports from Mexico. Nissan has significant manufacturing operations in Mexico.

The auto industry also hopes that Trump, a longtime critic of EVs, could slow their adoption in the United States, possibly by loosening emissions regulations.

M&A bankers in Tokyo said the combination of Nissan's low market value and its significant manufacturing capacity in the US made the company an increasingly attractive target for non-Japanese buyers.

"There are certainly companies that are looking at Nissan as a potential way to buy a US manufacturing presence as a way around any future tariffs," said one banker who advises several Japanese carmakers. has given

"The price is low enough to make it something to do, and so it's not surprising that Nissan would be looking for a domestic merger as a hedge against that."

A tie-up would have ramifications for Mitsubishi Motors, in which Nissan owns about 27 percent, and could become part of the enlarged company. The three brands together would have produced around 80 lakh vehicles annually.

Nissan is planning a series of product launches to deal with its worsening financial performance after failing to combat a slowdown in global EV sales with a strong hybrid offering: cars that combine a conventional combustion engine with a battery. Adds power. Sales of these vehicles have helped Toyota.

Nissan has recently been targeted by activist investors including Affissimo Capital ManagementA Singapore-based hedge fund known for high-profile campaigns against some of Japan's biggest names, including Toshiba.

If talks on a merger between Nissan and Honda continue, the two companies will need to work out how to reconcile their different corporate cultures.

The Japanese government had floated the idea of ​​merging Nissan and Honda in 2020.

Tokyo officials fear that domestic carmakers cannot compete with Chinese rivals as stand-alone companies on EVs and software, despite concerns about the merger's impact on employment.

The FT reported last month that Renault is set to sell part of its stake in Nissan to Honda as part of a restructuring of its 25-year-old alliance.

A person close to Renault said a stronger relationship between Nissan and Honda could be "only positive" for the French group.

Renault last year restructured its alliance with Nissan, with the French group reducing its stake in the Japanese company to just under 36 percent.

Nissan has a 15 percent voting stake in Renault.