(Reuters) - Japanese carmakers Honda ( HMC ) and Nissan ( NSANF ) are in talks to deepen ties, according to sources, including a possible merger, as challenges from Tesla and Chinese rivals urge a restructuring of Japan's auto industry.

The two Japanese companies combined would become the world's third-largest auto group by vehicle sales after Toyota and Volkswagen.

SALES

Honda ( HMC ) sold 3.98 million vehicles globally last year, while Nissan ( NSANF ) sold 3.37 million vehicles on a preliminary basis.

Their combined 2023 sales totalled 7.35 million vehicles, more than the 7.31 million reported by South Korea's Hyundai and its affiliate Kia, currently the world's third-largest auto group.

PRODUCTION

Honda ( HMC ) produced 4.19 million vehicles globally last year, while Nissan ( NSANF ) manufactured 3.44 million vehicles.

EMPLOYEES

Honda ( HMC ) had 194,993 employees as a consolidated group, while Nissan ( NSANF ) employed 133,580 as of the end of March, according to securities filings.

MARKET CAPITALISATION

Honda's ( HMC ) market capitalisation is about $44 billion, while Nissan's ( NSANF ) is about $10 billion after a share price surge on Wednesday, meaning a full merger would be bigger than the giant $52 billion deal between Fiat Chrysler and PSA in 2021 to create Stellantis.

MAJOR MARKETS

Honda's ( HMC ) most important market is the United States, accounting for a third of its 2023 vehicle sales. Combined with Canada and Mexico, North America represented 37% of sales, while China's share was 31% and Japan's was 15%. Europe accounted for only 2% of sales.

Nissan's ( NSANF ) biggest market is also North America, accounting for 37% of its vehicles sold in financial year 2023, with the U.S. representing 27%, China at 23%, Japan at 14% and Europe at 10%.

ELECTRIFICATION TARGETS

Honda ( HMC ) has a goal of boosting electric vehicle output to more than 2 million units per year by 2030, when the automaker aims to convert 40% of its new car sales to EVs and fuel cell vehicles. By 2040, Honda ( HMC ) will sell only EVs and FCVs.

As gasoline-electric hybrid cars have gained popularity in its key North American market, Honda ( HMC ) on Wednesday announced an additional 2030 target to sell 1.3 million hybrid vehicles annually, double its 2023 levels.

Nissan ( NSANF ), once an EV pioneer that introduced the first mass-market electric car Leaf in 2010, aims for EVs and hybrids to make up 60% of its global sales by 2030, as announced in its latest strategy update issued in March.

($1 = 153.4400 yen)

(Compiled by Kantaro Komiya in Tokyo; Editing by Jamie Freed)