The plan announced Monday by Japanese automakers Honda and Nissan to merge by 2026 highlights how the rise of Chinese automakers such as BYD is pressuring the industry to look for potential cost savings and increased scale,

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.