Renault has dropped plans for a luxury car based on the Mercedes-Benz E-class platform, company CEO Carlos Tavares has revealed.

He said that Renault "hadn't found a business model that works". However, Tavares added that the project was not dead, but that "a good equation" might still be found with partners Mercedes in the future.

According to the Wall Street Journal, the proposed luxury Renault, which was likely to have been branded 'Initiale Paris' and would have been priced from £40,000, was dropped because the current E-class platform would be close to the end of its production run, just as the new Renault would be scheduled to arrive in the showroom.

Continuing the production of a defunct component-set would be complex and expensive and would rule out the proposed Renault being built on an existing Mercedes production line. Meanwhile, the ageing Espace – currently Renault’s flagship model – is expected to be replaced by an upmarket SUV next year.

Renault is still on schedule to launch the Initiale Paris sub-brand next year. This will be used on high-spec versions of Renault's current mainstream models, starting with the new Clio. Renault has been absent from the premium car market since the slow-selling Vel Satis hatchback was dropped in 2009.

Renault-Nissan and Mercedes have a number of co-operative projects in train, including sharing the next-generation, rear-engined Smart platform that is also expected to underpin the all-new Twingo. Mercedes is also supplying the A-class platform to Nissan's Infiniti brand, which will use it as the basis of the British-built Q30.