BANGKOK>> Japanese automakers Nissan Motor Corp. and Honda Motor Co. confirmed Wednesday that they are discussing closer collaboration but denied reports they have decided on a merger.

Nissan’s share price soared nearly 24% in Tokyo after reports citing unnamed sources said it might merge with Honda to form the world’s third-largest automaking group. Honda’s share price fell as much as 3%. Nissan alliance member Mitsubishi Motors Corp. is also part of the talks.

Trading in Nissan’s shares was suspended but then resumed after the companies jointly issued a statement saying they were “considering various possibilities for future collaboration, but no decisions have been made.”

An industry shake-up

The ascent of Chinese automakers is rattling the industry at a time when manufacturers are struggling to shift from fossil fuel-driven vehicles to electrics. Relatively inexpensive EVs from China’s BYD, Great Wall and Nio are eating into the market shares of U.S. and Japanese car companies in China and elsewhere.

Japanese automakers have lagged behind big rivals in EVs and are now trying to cut costs and make up for lost time.

Nissan, Honda and Mitsubishi announced in August that they will share components for electric vehicles like batteries and jointly research software for autonomous driving to adapt better to dramatic changes in the auto industry centered around electrification. A preliminary agreement between Honda, Japan’s second-largest automaker, and Nissan, the third-largest, was announced in March.

A merger could result in a behemoth worth about $55 billion based on the market capitalization of all three automakers.

Joining forces would help the smaller Japanese automakers add scale to compete with Japan’s market leader Toyota Motor Corp. and with Germany’s Volkswagen AG. Toyota itself has technology partnerships with Japan’s Mazda Motor Corp. and Subaru Corp.

What would Honda need from Nissan?

Nissan has truck-based body-on-frame large SUVs such as the Armada and Infiniti QX80 that Honda doesn’t have, with large towing capacities and good off-road performance, said Sam Fiorani, vice president of AutoForecast Solutions.

Nissan also has years of experience building batteries and electric vehicles, and gas-electric hybird powertrains that could help Honda in developing its own EVs and next generation of hybrids, he said.

“Nissan does have some product segments where Honda doesn’t currently play,” that a merger or partnership could help, said Sam Abuelsamid, a Detroit-area automotive industry analsyt.

While Nissan’s electric Leaf and Ariya haven’t sold well in the U.S., they’re solid vehicles, Fiorani said. “They haven’t been resting on their laurels, and they have been developing this technology,” he said. “They have new products coming that could provide a good platform for Honda for its next generation.”