Hitachi Ltd on Wednesday said its vehicle components operations would merge with three Honda Motor Co-affiliated suppliers, creating Japan's third-biggest auto-parts supplier by sales, to better compete to develop next-generation car parts.
The move comes as carmakers struggle to adapt to technological change including the rise of electric vehicles and self-driving systems.
Hitachi said it would take a 66.6% stake in the surviving company formed in the merger with engine components maker Keihin Corp, steering systems maker Showa Corp and brake components producer Nissin Kogyo Co. It would keep the Hitachi Automotive Systems' name.
Honda will take a 33.4% stake in the company, Hitachi said in a statement.
The Yomiuri newspaper reported earlier on Wednesday that the companies were considering the merger. Shares in the three Honda suppliers each ended the day more than 20% higher, surging after an earlier trade suspension was lifted.