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.

Japan’s second- and third-largest automakers hope the $50 billion deal would help them catch up with Tesla and China’s BYD in electric vehicles and advanced software.

Nissan and Honda agreed to consider a merger and set up a joint holding company, which would create the world's third-largest automaker.