Honda and Nissan are in talks to merge by 2026, they said on Monday, a historic pivot for Japan's auto industry that underlines the threat Chinese EV makers now pose to the world's long-dominant legacy car makers.

The tie-up would create the world's third-largest auto group by vehicle sales after Toyota and Volkswagen

It would also give the two companies scale and a chance to share resources in the face of intense competition from Tesla and more nimble Chinese rivals, such as BYD.