Japanese automakers Honda and Nissan will attempt to merge and create the world’s third-largest automaker by sales as the industry undergoes dramatic changes in its transition away from fossil fuels.

Honda's CEO said it was "difficult" to explain why Nissan would make a good business partner. Analysts believe that Honda's ideal partner for a merger would be a more "healthy and financially sound company.

Facing extreme competitive pressure from the rise of Chinese EV makers, the Nos. 2 and 3 Japanese automakers turn to each other to build strength.