Fiat Chrysler Automobiles says it’s pulled out of merger talks with Renault just a week after submitting a proposal as it blames French politics.

The proposal would have seen the carmakers share development costs on key tech such as EVs, bringing an estimated €5bn cost savings

Proposed at the end of May, the €33bn (£29.2bn) deal would have seen a 50/50 merger, creating the world’s third-largest carmaker after Volkswagen and Toyota, and allowing the companies to share development costs on key technology such as electric vehicles and self-driving cars.

In its latest statement, which follows a board meeting, FCA outlined that while it “remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted”, it had become clear “that the political conditions in France do not currently exist for such a combination to proceed successfully”.

Less than an hour before FCA’s statement, Renault had said that a meeting had seen the board of directors continue reviewing the proposal with interest but that they had been unable to take a decision due to the request by the French Government, which has a 15% stake in Renault, to postpone the vote to a later council.

French Finance Minster Bruno Le Maire acknowledged FCA’s decision to exit the merger talks but said in a statement that the state had worked constructively on the deal with all stakeholders. He added that agreement had been reached on three of the four conditions set by the state for a final agreement but needed to get explicit support from Nissan.

The four conditions included the completion of this operation as part of the alliance between Renault and Nissan; ensuring jobs and industrial sites in France were preserved, establishing balanced governance between Renault and FCA, and the participation of the new group in EV battery initiatives in Germany.

A later statement by Renault expressed its disappointment not to have the opportunity to continue to pursue the proposal, which it said had “compelling industrial logic and great financial merit, and which would result in a European-based global auto powerhouse”.

Announcing the end of the talks, FCA expressed its thanks to Renault, in particular to its chairman and its CEO, and Alliance partners Nissan and Mitsubishi for engaging with the proposal and added: “FCA will continue to deliver on its commitments through the implementation of its independent strategy.”

The proposal to Renault came shortly after FCA tied up with Tesla to circumvent European emissions legislation. Said to have cost FCA around $1bn (£760m), the deal sees FCA includes Tesla’s zero-emission sales into its own figures to avoid paying fines for exceeding new European Union emissions limits. Under EU rules, the average emissions of a manufacturer’s new car fleet in 2021 must be 95g/km or less, compared to 130g/km currently.