Motor Nissan shares rose Wednesday after a media report which the struggling Japanese automaker is looking to join Honda Motorsto form a larger entity that can compete with larger rivals and invest more in the growing market for electric vehicles.

Nissan shares were last traded up 22%, while Honda shares were down 1.6%.

Honda and Nissan are considering operating under a holding company, and will soon sign a memorandum of understanding, according to a report in the Nikkei newspaper. They also seek to eventually bring Mitsubishi Motorsin which Nissan is the largest shareholder with a 24% stake, under the holding company, according to the report.

The merger, if successful, would be especially beneficial for Nissan, which had previously announced plans to cut 9,000 jobs and cut global production capacity by a fifth amid fierce competition in its key markets.

Joe McCabe, the president and CEO of AutoForecast Solutions, told CNBC Wednesday that Nissan needs "revitalization" after its relationship with Renault she went to the side.

"They (Nissan) really didn't have a leadership position in any of the segments they competed in," he said.

In a statement, Nissan said that media reports that it is "considering a business integration" with Honda are not based on an announcement from the company. Nissan said it is considering various possibilities for future collaboration with Honda and Mitsubishi, but no decisions have been made. shares of Mitsubishi they were last up to 14%.

The combined Nissan-Honda-Mitsubishi enterprise would be equivalent to more than 8 million vehicle sales per year, according to Nikkei. This places the company among the world's largest automakers, but still below its Japanese automakers Toyota Motorin 11.2 million in 2023, as well as a German car maker Volkswagenwhich last year reported sales of 9.2 million vehicles.

The merger report follows the two Japanese automakers entering into a strategic partnership earlier this year on shared automotive components and software.

Such a tie-up would be the largest auto industry merger since Fiat Chrysler merged with France-based PSA Groupe to form Stellar in January 2021.

The global automotive industry faces several challenges including the transition to EVs, a category dominated by the likes of them Tesla and BYD of China. Volkswagenfor example, plans to close factories and cut thousands of jobs in Germany, while General Motors this la((arhe pulled the plug on Cruise, her self-driving robotaxi company.

For Honda and Nissan, there is also the threat of tariffs proposed by President-elect Donald Trump that could require a massive reorganization of global supply chains.

- Michael Wayland and Kevin Lim contributed to this report.