Japanese automakers Honda and Nissan are reportedly engaged in talks that could result in a merger, creating the world’s third largest automaker.

Multiple media outlets are reporting the move, which is in the early stages. A merger could also involve Mitsubishi, as Nissan holds a large stake in the company, according to The New York Times.

No final decision has been made, The Wall Street Journal reported. The two automakers are expected to sign a memorandum of understanding within a week.

The companies were already engaged in talks dealing with electric vehicles in a bid to manage production costs. Both are faced with increasing competition from EV makers such as Tesla and China’s BYD, analysts said.

Honda sold about 4 million vehicles around the world in 2023, while Nissan sold about 3.4 million, according to the companies. Combining the two would create a company just behind Toyota and Volkswagen in sales.

Honda and General Motors had talked earlier of collaborating on electric vehicles, before walking away last year.

Analysts have expressed concerns about the likelihood of political scrutiny in Japan over the deal, given the potential for job cuts if a merger comes to fruition, according to CNBC.

Honda began manufacturing automobiles and engines in Alabama in 2001. The automaker has pumped more than $2 billion into the plant, which contributes more than $12 billion annually in economic impact to the state of Alabama.

The Lincoln plant has the capacity to manufacture 340,000 vehicles and engines annually and employs more than 4,500 people.