French carmaker Renault , Japanese alliance partner Nissan <7201.T> and Germany's Daimler will unveil partnership plans on Wednesday, France's industry minister said.

The companies said they would hold a joint news conference on Wednesday morning at 0745 GMT, while a source had earlier told Reuters they would issue a statement before European markets opened.

Renault and Daimler have been discussing a partnership as carmakers worldwide seek to become more competitive by sharing technology costs and gaining scale.

The automobile sector is scrambling to meet tightening emission rules as it emerges from a savage downturn. German new-car sales figures for March on Tuesday showed a fourth consecutive monthly fall as that market struggles to cope without government subsidies.

French newspaper Les Echos said in an advance copy of its Wednesday edition that Daimler would hold 3.1 percent of Renault and of Nissan as part of the deal, while Renault and Nissan would each take 1.55 percent in the German carmaker. It did not say where it got the information. A Renault spokeswoman declined to comment on the report.

Credit Suisse analyst Arndt Ellinghorst said the planned partnership highlights the problem we have in Europe. It's an industry that is not consolidated, that is highly complex, and which is exposed to the tightest emissions regulation in the world. This is driving consolidation, the need for scale.

Italy's Fiat , for example, has said it needs more volume in small cars in Europe, Ellinghorst said.

French Industry Minister Christian Estrosi said on Tuesday Renault's board had held an extraordinary meeting on an alliance in the morning.

He later told a parliamentary hearing France had approved the plans, pledging that France would remain the principal shareholder in Renault, with its 15 percent stake.

We have approved the closer ties between Renault and Nissan, and Daimler to allow us to have a more significant alliance, Estrosi told a parliamentary hearing, adding that alliances allowed the car sector to share heavy investments and be more competitive.

Estrosi said the companies would give more details on the deal on Wednesday in Brussels but added that at this stage I can guarantee that the French state will remain the main shareholder.

Renault shares closed up 3.86 percent at 36.87 euros and Daimler shares were up 0.28 percent at 35.505 euros, against a European auto stocks index <.SXAP> 0.80 percent higher.

The move is good news for Daimler, maker of the luxury Mercedes-Benz brand as well as the struggling Smart brand, which wants to tap into Clio-maker Renault's small-car expertise. Renault and Nissan are expected to benefit from Daimler's engine know-how.

This (deal) clearly gives Daimler the opportunity to sell small cars profitably in Europe, Credit Suisse's Ellinghorst said.

This is the prerequisite to continue selling larger cars in Europe, because everybody will have to comply with the 90 gramme industry average CO2 target by 2020 and if you don't set up the structures now it will be too late.

Renault currently owns 44.3 percent of Nissan, while the Japanese company has a 15 percent stake in its French partner.

Daimler, Renault and Nissan Europe declined to comment on their plans.

(Additional reporting by Gilles Guillaume and Elizabeth Pineau; editing by Sharon Lindores, Karen Foster and Steve Orlofsky)

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