Nissan Motor (NSANY) shares surged 30% Wednesday following a Nikkei newspaper report that the struggling Japanese automaker is in talks with Honda Motor (HMC) over a possible merger in a move that could upend the electric vehicles (EV) market. Meanwhile, Honda shares were down about 2.5% in afternoon trading.

Honda and Nissan have not yet confirmed the deal, nor have they denied it.

The two are considering operating under a holding company, according to the Nikkei article, and will soon sign a memorandum of understanding. That move would enable the Japanese automotive giants to pool their resources to better compete against Chinese EV makers and Tesla.

According to Nikkei, Mitsubishi Motors, in which Nissan holds a 24% stake, would also be a part of the future holding company

Talks of a merger come a month after Nissan posted poor second-quarter results and announced it would cut 9,000 jobs and global production capacity by one-fifth.

The potential merger illustrates just how of much a threat Chinese automakers are in the global automotive space, and the impact they are having in the EV market.

In China, more than half of all new cars sold are either fully electric vehicles or hybrids, according to the Wall Street Journal, with three in five local consumers buying Chinese brands, and exports soaring at around 4.1 million vehicles.