Fiat Chrysler Automobiles NV (FCA) has proposed a merger with its French rival Renault (Groupe Renault), the Italian-American carmaker announced on Monday. A similar deal could lead to the third major automaker in the world, Reuters reported on Wall Street Journal.

The joint venture ownership will be evenly distributed among FCA's and Groupe Renault's shareholders and will create a car manufacturer that sells an estimated 8.7 million cars each year. It will also have a strong presence in key regions, automotive markets and technologies, generating € 5 billion a year, FCA said in an official statement.

The proposal of the Italian-American carmaker will be discussed by Renault's Board of Directors, the BNR announced.

"The broad and complementary co-brand portfolio will provide full coverage on the market, from luxury to mainstream cars," said Fiat Chrysler.

The proposed deal will bring together the two carmakers at a Dutch holding company. After paying a special dividend of € 2.5 billion to FCA's shareholders, each of the two companies will receive 50 percent of the joint venture in the form of new shares.

Negotiations between the two countries were in an advanced phase on Sunday and included a number of possible outcomes, the sources told the Wall Street Journal. According to them, companies are expected to announce a cooperation agreement in areas that include technology for electric vehicles, production platforms and connectivity.

Renault's chairman, Jean-Dominique Senard, met with French finance minister Bruno Le Mer, on Friday, and presented the plan for the merge of the two companies. The French state, which owns 15% of Renault, does not oppose the merger, sources from the Wall Street Journal said.

For his part, Reuters notes that the pressure for consolidation among carmakers is rising in view of the challenges of electrification, the tightening of emission regulations and expensive new technologies developed for standard and stand-alone vehicles.