Japanese automakers Nissan and Honda have announced plans for a merger that would catapult them to a top position in an industry that's in flux as it transitions away from its reliance on fossil fuels.

Honda's CEO said it was "difficult" to explain why Nissan would make a good business partner. Analysts believe that Honda's ideal partner for a merger would be a more "healthy and financially sound company.

Facing extreme competitive pressure from the rise of Chinese EV makers, the Nos. 2 and 3 Japanese automakers turn to each other to build strength.