TOKYO (Kyodo) -- Honda Motor Co. said Wednesday it will cancel a tie-up with General Motors Co. for a joint self-driving taxi venture, after the U.S. automaker outlined its plan to withdraw from autonomous taxi development.

GM said in a release on Tuesday that it would no longer allocate funds for driverless taxi development, citing the "considerable time and resources that would be needed to scale the business" and the pressures of an increasingly competitive market.

The two carmakers had planned to begin operations at the taxi venture in Tokyo in 2026 using a self-driving vehicle classified as a Level 4 autonomous vehicle, the second highest of five scales for the technology. Level 4 means the vehicles are fully automated under certain conditions.

Honda will sell its holdings in a GM subsidiary in charge of the driverless taxi business to the U.S. automaker.

Japan has been falling behind other countries such as the United States and China in introducing driverless taxis. Amid a shrinking population, the country is also grappling with driver shortages in the transportation sector.