TOKYO (AP) — Japanese automakers Honda and Nissan have announced plans to work toward a merger that would form the world’s third-largest automaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels.

The Detroit Three are facing an auto industry increasingly affected by the rise of China as demonstrated by the planned merger of Honda and Nissan.

Japanese auto makers Honda and Nissan said they plan to merge as traditional car makers try to cope with falling sales, slumping share prices, and increased competition from electric-vehicle makers. Honda and Nissan signed a memorandum of understanding to explore synergies and integrate their businesses through establishing a joint holding company,