Shares in Renault rose almost 5 per cent on Thursday following reports the French motor company is in talks with Nissan to explore a potential merger.

The two firms formed an alliance in 1999, and describe it as a “buffer to protect its partners during regional downturns”.

Last year, the partnership became the world’s largest car maker, ahead of Volkswagen. 

However, the groups are now in discussions about a possible merger that would create a single new company, trading as one stock, according to Bloomberg, which also reported that Carlos Ghosn, the chairman of both companies, is driving the negotiations and would run the combined entity.

Earlier this year, Reuters reported that Nissan was in talks to buy the bulk of the French government’s stake in Renault. The Renault-Nissan alliance said at the time that it was “pure speculation”.

At the moment, Renault owns 43 per cent of Nissan while the Japanese group has a 15 per cent stake in the French firm.

A spokesperson for the alliance said it does not comment on “rumours and speculation”.