Fiat Chrysler and Renault are in talks on a comprehensive global tie-up that could address some of the main weaknesses of both carmakers, two sources with knowledge of the discussions told Reuters.

The talks are at an advanced stage, the sources said. The Financial Times earlier reported that FCA and Renault were discussing a deal to forge “extensive ties” to tackle structural challenges facing the global auto industry.

A spokesman for FCA declined to comment on the report. Renault spokesman Frederic Texier said the French carmaker had no comment.

Pressure for consolidation among carmakers has grown with the challenges posed by electrification, tightening emissions regulations and investment-thirsty technologies for connected and autonomous vehicles. FCA and Renault have a combined market capitalisation approaching 33 billion euros ($37 billion) and total global sales of 8.7 million vehicles. Besides bringing greater scale, a tie-up could help patch flaws on both sides.

FCA has a highly profitable North American RAM trucks business and Jeep brand but has been losing money in Europe, where it may also struggle to keep pace with looming carbon dioxide emissions curbs.

Renault, by contrast, is an electric-car pioneer with relatively fuel-efficient engine technologies and a strong presence in emerging markets, but no US business.

Any tie-up would likely face political and workforce hurdles, particularly in Italy. Most of FCA’s European plants are running below 50 per cent capacity.

It was unclear whether the FCA-Renault deal talks would conclude successfully, the sources said.

The plan under consideration could involve some transfer of equity, one source said. “This isn’t just another partnership — it’s more than that.”

Both carmakers have also been exploring tie-ups with other partners.

Reuters