Two of Australia's largest car dealership operators could merge into a $1.8 billion industry giant after AP Eagers launched a takeover bid for Automotive Holdings Group.

AP Eagers, which is AHG's largest shareholder with a 28.8 per cent stake, on Friday announced the all-scrip offer for the remaining shares. The news sent AHG's share price soaring, finishing the day trading more than 20 per cent higher at $2.15.

Automotive Holdings Group in February announced a writedown of $147 million across its 105 car dealerships around Australia and New Zealand. Credit:Louise Kennerley

If the merger is approved, the combined company would own 229 new-car dealership sites in Australia, 13 in New Zealand and 68 new truck and bus dealerships.

The company would command 12 per cent of the entire new vehicle sales market in Australia, AP Eagers said on Friday.