After the merger, which will be an all-stock deal, the new company will be led by Carlos Tavares, the chief of PSA, as the chief executive, and John Elkann, the head of Fiat Chrysler, will be the chairman, one of the people with knowledge of the deal said. PSA will pay out a special dividend of about €3 billion, with money coming from the sale of its stake in Faurecia, a parts maker, this person said, and Fiat will pay its shareholders a special dividend of about €5 billion, as well as more than €200 million from the proceeds of the sale of its Comau division.

The combined company is also expected to be a Dutch holding company; it will have an 11-member board, this person said, with six seats for PSA and five for Fiat Chrysler.

Earlier this year, competitive pressures pushed Fiat Chrysler to explore a deal with Renault, another French automaker, before talks fell apart. A merger with PSA is seen as more likely to succeed because the company is not already in a relationship. Renault’s troubled alliance with Nissan complicated its attempt to link up with Fiat Chrysler.

The auto industry is moving toward battery-powered vehicles and autonomous driving technology, and companies like Tesla are challenging the established carmakers. Smaller companies like PSA and Fiat Chrysler may lack the size to manage the enormous costs of this transition.

“This stuff is so expensive and no one knows when it’s going to gain traction or make money,” said Michelle Krebs, executive analyst at AutoTrader, a car sales website.

Other companies like Ford and Volkswagen or Honda and G.M. have formed partnerships to share costs of developing new technology. But Fiat may need a full merger so that it can take advantage of Peugeot’s electric car technology to meet European Union limits on carbon dioxide emissions and avoid substantial fines.

Further intensifying the competitive landscape are powerful technology companies with considerable war chests, like Google, which has invested heavily in autonomous driving technology. Ride-sharing companies like Uber and Lyft have eliminated the need for many people to buy their own cars, forcing automakers to adjust assumptions that have guided their business decisions for decades.