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Nissan has confirmed that it is working towards a merger with fellow Japanese car giant Honda.

The two companies have signed a memorandum of understanding (MOU) on bringing the two companies together through a joint holding company. If successful, the process would create the world’s third largest automotive manufacturer worth more than $50bn (around £40bn).

Nissan - which employs around 6,000 people at its plant and supports many more North East jobs through its supply chain - has been working with Honda on electric vehicle technology since March. The negotiations to fully merge come as Nissan has seen a major downturn in sales and signalled 9,000 global job losses, though it has not said how Sunderland would be affected.

The companies said their agreement “is aimed to serve as an option to maintain global competitiveness and for the two companies to continue to deliver more attractive products and services to customers worldwide”.

Nissan’s president and CEO Makoto Uchida said: “Today marks a pivotal moment as we begin discussions on business integration that has the potential to shape our future. If realized, I believe that by uniting the strengths of both companies, we can deliver unparalleled value to customers worldwide who appreciate our respective brands.

“Together, we can create a unique way for them to enjoy cars that neither company could achieve alone.”

Honda executive officer Toshihiro Mibe said: “Creation of new mobility value by bringing together the resources including knowledge, talents, and technologies that Honda and Nissan have been developing over the long years is essential to overcome challenging environmental shifts that the auto industry is facing. Honda and Nissan are two companies with distinctive strengths.

“We are still at the stage of starting our review, and we have not decided on a business integration yet, but in order to find a direction for the possibility of business integration by the end of January 2025, we strive to be the one and only leading company that creates new mobility value through chemical reaction that can only be driven through synthesis of the two teams.”

The companies said the potential merger would provide it with a number of benefits, allowing it to standardise vehicle platforms and share expertise in research and development. It pointed to potential savings, but said they would come from “the integration of systems and back-office operations” rather than any changes to manufacturing plants.

The challenges in the automotive sector are not confined to Nissan, with Ford recently announcing 4,000 job losses in Europe and Vauxhall owner Stellantis saying it will close its plant in Luton, with 1,100 jobs at risk. Car makers have also objected to the º£½ÇÊÓƵ's zero emissions vehicle mandate, sparking a review from the incoming Government.