THE companies behind Peugeot, Citroen and Vauxhall and the Fiat/Chrysler empire have agreed to merge creating one of the largest car groups in the world.

The new entity - still unnamed at the moment - will be the third biggest by revenue and the fourth by sales, estimated at some 8.7 million vehicles a year.

Combined revenue will be more than £150 billion putting the new group behind only Toyota and Volkswagen in the global league table and ahead of US giants General Motors and Ford and the Renault-Nissan-Mitsubishi Alliance.

The £39 billion merger brings together more than a dozen vehicle brands including Peugeot, Citroen, DS and Vauxhall as well as Fiat, Chrysler, Jeep and Dodge.

The new group will be headed up by FCA's John Elkann as chairman with Carlos Tavares, the boss of PSA, as chief executive.

"Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services," said Mr Tavares.

"I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigour and enthusiasm."

And Mike Manley, the current chief executive of FCA, added: "This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors.

"Our people share a common trait - they see challenges as opportunities to be embraced and the path to making us better at what we do."

The new group has core markets in Europe, North and Latin America and says it is committed to addressing the challenges presented by a new era of mobility which includes the introduction of more electric and low emission vehicles.