Japanese auto giants Honda Motor and Nissan Motor will enter talks on a merger aimed at helping them compete against Tesla and other electric vehicle makers, the newspaper Nikkei reported early Wednesday.

The two firms are looking to operate under a single holding company and will soon sign a memorandum of understanding for the new entity, according to the Tokyo-based Nikkei.

It reported that Honda and Nissan will consider bringing in Mitsubishi Motors, of which Nissan is the top shareholder, under the holding company to create one of the world’s largest auto groups.

Honda and Nissan in March said they had agreed to explore a strategic partnership in electric vehicles and other areas.

Analysts said then that the move was aimed at catching up with Chinese competitors who have stolen a march in EVs while Japanese firms have lost ground by focusing more on hybrid vehicles.