Volkswagen and Porsche have agreed to create a new merged car manufacturing group.

Porsche had been vying to control VW's operations, but the new move to create a new merged manufacturing group means a hostile takeover will not happen.

Each of VW's nine brands, including Seat, Skoda and Audi will maintain their independence, as will Porsche under an "integrative leading company".

Porsche said: “In the final structure of the new company, 10 brands shall stand below an integrative leading company alongside each other, whereby the independence of all brands and explicitly also of Porsche shall be ensured.”

In January, Porsche announced it had increased its stake in VW to more than 50%, and said it planned to lift its stake in VW to 75%.

However, even with a 75% stake it would not have been able to take complete control because under the "VW law" the state of Lower Saxony, which holds a 20% stake, can block strategic decisions.

Lower Saxony will have to be consulted on VW and Porsche’s decision and final plans for the new group will be decided within the next four weeks.