Japanese auto giants Honda and Nissan on Thursday confirmed they had scrapped merger talks announced in December, bringing an end to a tie-up that would have created the world's third-largest automaker.

The firms said in a joint statement that they "agreed to terminate the MOU (memorandum of understanding) signed on December 23 last year for consideration of a business integration between the two companies".

The firms' intention to join forces had been seen as a bid to catch up with US titan Tesla and Chinese firms in the electric vehicle market.

Honda's CEO insisted in December that it was not a bailout for Nissan, which last year announced thousands of job cuts after reporting a 93 percent plunge in first-half net profit.

Local media reports have said the discussions unravelled after Honda proposed to make its struggling rival a subsidiary instead of the plan, announced in December, to integrate under a new holding company.

In the joint statement, the automakers confirmed Honda "proposed changing the structure from establishing a joint holding company... to a structure where Honda would be the parent company and Nissan the subsidiary through a share exchange".

"As a result of these discussions, both companies concluded that, to prioritise speed of decision-making and execution of management measures in an increasingly volatile market environment heading into the era of electrification, it would be most appropriate to cease discussions and terminate the MOU," the statement said.

They will, however, continue to "collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles, striving to create new value and maximise the corporate value of both companies," it added. (AFP)