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TOKYO (Reuters) -Honda and Nissan are considering producing vehicles in one another's factories as part of their plan to deepen ties and potentially merge, Japan's Kyodo news agency said on Saturday.
Honda will consider supplying hybrid vehicles to Nissan as part of the plan, the report said, without citing the source of the information.
A merger of Honda, Japan's second-largest car company, and Nissan, its third-largest, would create the world's third-largest auto group by vehicle sales, behind Toyota and Volkswagen, making 7.4 million vehicles a year.
The two automakers forged a strategic partnership in March to cooperate in electric vehicle development, but Nissan has faced financial and strategic troubles in recent months.
As announced, Honda, "Nissan and Mitsubishi Motors are in the process of bringing together our strengths and exploring potential forms of cooperation, but nothing has been decided yet", a Honda spokesperson said, when asked about the report.
Nissan declined to comment, saying the details of the report were not based on a company announcement. Nissan is the top shareholder in Mitsubishi Motors.
Kyodo said Honda could use Nissan's car factory in Britain, as it now only has factories for engines and motorcycles in Europe.
The move comes amid concerns over how president-elect Donald Trump's policies may shake up manufacturing with his promises of protectionist trade policies, the report said.
(Reporting by Sakura Murakami and Maki Shiraki; Editing by Stephen Coates, Muralikumar Anantharaman and William Mallard)