The cost of developing electric and self-driving vehicles is leading to all sorts of interesting tie-ups. Who would have thought that BMW and Daimler would work in such close alliance- they are meant to be arch rivals. Speculation continues that PSA and JLR will merge. Now there is the possible merger between Fiat Chrysler Automobiles and Renault. Renault sees it as a good thing for all concerned, including Nissan who appear sanguine too; although the cynic in me sees it as a potential opportunity for Nissan to create even greater distance from Renault.
Meanwhile, Renault’s share price has been affected by the Ghosn matter hence Fiat taking an interest. PSA’s Carlos Tavares is quoted as saying the proposed merger is “ ..a virtual takeover of Renault by Fiat.”
Few car mergers have ended as marriages in heaven- BMW and Rover who jilted Honda to walk up the aisle with Munich’s finest. Daimler and the Chrysler Group; GM and the Fiat group; GM and Saab; Ford with Aston Martin, JLR and Volvo. PSA and Fiat were in talks about creating a common platform earlier this year but nothing came of it. Get the picture.
Only two mergers that have shown success are Geely’s ownership of Volvo and JLR under Tata. JLR was “family” already dating back to their British Leyland days. As an aside one hopes that JLR’s genetic coding does not replicate the bad old days of BL by competing in the same space- F Pace or Discovery and so forth.
At first glance, it makes sense for Renault and Fiat to join forces. Share costs and platforms and take on the future world of mobility together. I may be unfair to Fiat but I suspect they have a lot of catch up to meet current emission targets and avoid heavy fines- look at the recent deal with Tesla about which I commented a few weeks ago. Currently, Fiat Chrysler needs to reduce its average European fleet CO2 emissions of 124 grams per kilometre to 93g/km to meet European regulations.
As various commentators have mentioned this week, Fiat excels in designing small cars but the cost of technology is making town runners uneconomic - the tiny diesel has gone.
Renault has made great headway in electric such as the Zoe and Twizzy so let’s hope they can evolve a good business case for merging. It could be the opportunity for Fiat to use its fine tradition of cute small cars to design something fit for the 21st Century- electric; good range, practical and affordable.
Assuming Renault and Fiat can deal and keep Nissan on side (oh yes Mitsubishi too) then one hopes there are no competition or antitrust issues; one offset may be new players like Dyson. Also, the regulators in terms of emissions and self-driving should factor in that mobility is for all, not just those who can afford the high tech.
What for the future? Will PSA and JLR complete the deal? It makes a good business argument provided they don’t fall into the BL trap. Each brand must keep its identity and autonomy where it makes sense. Will PSA allow JLR to have its own management team? Will Tata play a part? Tata has been steadfast and their continued involvement would help build market opportunity in India. Business issues aside let’s now forget that both Jaguar and Peugeot have a strong tradition of building fine riding cars that look great too- think XJ; 305 and 405. Peugeot had a reputation for ruggedness so that’s why the 504 was a huge hit in Africa.
Whether it’s Renault and Fiat or PSA and JLR apart from the alignment of values there needs to be some very careful thought about how one manages governance and innovation. The auto industry is going through a revolution, but to survive the final structure needs to be nimble and responsive- if that fails there are enough Young Turks with new thinking waiting for the old guard to fail.
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