Deal would create world’s third-largest carmaker in terms of annual sales amid competition from China

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Honda, Nissan and Mitsubishi have confirmed they are in talks over a possible three-way merger as the Japanese companies struggle with falling sales and competition from Chinese brands.

The companies confirmed on Monday that Honda and Nissan had agreed to “start consideration towards a business integration through the establishment of a joint holding company”, and that Mitsubishi would also decide on joining by the end of January.