Japanese automakers Honda and Nissan have announced plans to work toward a merger, forming world’s third-largest automaker by sales.

Honda Motor Co. and Nissan Motor Co. took their first historic steps toward merging, in hopes of creating a juggernaut that can survive aggressive competition from China that’s roiling the industry.The two Japanese auto manufacturers signed a basic agreement for merger talks on Monday and held a joint media briefing in Tokyo.

Both companies are grappling with intense global competition in the electric vehicle market from the likes of Tesla and China’s BYD.