TOKYO (AP) -- Japanese automakers Honda and Nissan have announced plans to work toward a merger that would form the world's third-largest automaker by sales, as the industry undergoes dramatic changes in its transition away from fossil fuels.

The two companies said they had signed a memorandum of understanding on Monday and that smaller Nissan alliance member Mitsubishi Motors Corp. also had agreed to join the talks on integrating their businesses.

Automakers in Japan have lagged behind their big rivals in electric vehicles and are trying to cut costs and make up for lost time as newcomers like China's BYD and EV market leader Tesla devour market share.

Honda's president, Toshihiro Mibe, said Honda and Nissan will attempt to unify their operations under a joint holding company. Honda will lead the new management, retaining the principles and brands of each company. They aim to have a formal merger agreement by June and to complete the deal and list the holding company on the Tokyo Stock Exchange by August 2026, he said.