Fiat Chrysler has withdrawn its merger proposal for French carmaker Renault, the Italian firm has said.
The announcement followed a failed attempt by Renault board members to reach a decision on the offer.
Renault said it had been unable to reach agreement because French government representatives had requested a postponement.
The French government is the biggest shareholder in Renault, with a stake of more than 15%.
Japan’s Nissan also owns 15% of Renault, while Renault owns 43.4% of Nissan’s shares.
Fiat Chrysler made the offer for Renault at the end of last month, describing it as a “transformative” proposal that would create a global automotive leader.
In its statement, Fiat Chrysler said it remained “firmly convinced” of the “compelling, transformational rationale” of the tie-up.
It said the terms had been “carefully balanced to deliver substantial benefits to all parties”.
It added: “However, it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”
Industry shifts toward electric models, along with stricter emissions standards and the development of new technologies for autonomous vehicles, have put increasing pressure on carmakers to consolidate.
The former chief executive of both Nissan and Renault, Carlos Ghosn, is awaiting trial following his fourth arrest amid allegations of financial misconduct.
The allegations have put a strain on the 20-year-old alliance, which also includes Japan’s Mitsubishi Motors.