Japan's Honda and Nissan said Monday they had embarked on formal merger talks that would create the third-largest car manufacturer globally with sales of as much as $191.4 billion and more than $19 billion profit.

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.

Nissan will be the victim of cost-cutting “carnage” if it combines forces with Japanese peer Honda, former Nissan CEO Carlos Ghosn told CNBC on Tuesday.