Fiat Chrysler has made a "transformative" merger proposal for French carmaker Renault, the Italian firm said on Monday, reports the BBC.
The combined business would be 50% owned by Fiat shareholders and 50% by Renault stockholders.
The carmaker said the merger would create a global automotive leader, with 8.7 million vehicle sales.
Carmakers have faced pressure to consolidate amid major industry shifts, including towards electric vehicles.
Shares in both companies rose strongly following the announcement.
In a statement, Fiat Chrysler (FCA) said the planned merger would create a "world leader in the rapidly changing automotive industry with a strong position in transforming technologies, including electrification and autonomous driving".