PSA Group, the French automotive giant that owns Peugeot, is reportedly in talks with its Italian-American rival Fiat Chrysler Automobiles (FCA) about a potential merger which would create a business with a combined market value of almost $50 billion.
The potential combination of PSA and FCA, first reported by the Wall Street Journal, comes as automakers around the world face heightened pressure to make more electric- and self-driving vehicles – an industry shift that requires significant spending on research and development.
The talks are reportedly still in the early stages and there is no guarantee that there will be a final deal.
Consolidation in the auto industry
Sergio Marchionne, FCA’s late CEO who played an instrumental role in the cross-border merger of Fiat and Chrysler, was a strong advocate of auto industry consolidation and proclaimed the need for more car mergers. Consolidation is a process of maturation in the market and refers to the combination of separate companies.
In 2015, Marchionne tried unsuccessfully to interest General Motors in a deal. Earlier this year, FCA almost merged with the French automaker Renault SA, however, the deal ultimately collapsed.
PSA has also been In 2017, PSA agreed to acquire GM’s European business for $2.3 billion, adding Opel and Vauxhall to its list of car brands.
Chaotic times for the automotive industry
Carlos Tavares, head of the PSA Group, believes the next decade will be a chaotic one for the auto industry.
In in an interview with Autocar earlier this year Tavares said “there’s going to be chaos between now and 2030.”
“Conditions are going to be extremely selective – not all manufacturers will survive the Darwinism, not all will master the EV [electric vehicle] track,” Tavares added.