Over the past few years, rumours have been circulating about FCA and the possibility of auto mergers with companies like General Motors and Renault-Nissan. FCA has been looking to increase profitability in small car platforms as well as building more shares in the European market. More opportunities would also exist for even more growth with an introduction to emerging markets such as India, but the largest being opportunity being in China. Both General Motors and Renault-Nissan have a large presence in China as well as Europe, but the even larger picture is having the platforms and architecture to be successful there. While those two groups failed to strike an agreement, PSA Groupe and FCA signed a merger officially on December 18th of 2019. This makes the PSA and FCA company the 4th largest OEM in the world by volume, and the 3rd largest by revenue. Many questions still exist over in the North American market. Who is PSA Groupe? Why is there a need for FCA to merge with a European OEM again? What does this mean for the North American market and the global market going forward? The answer is simple, increase global profitability while keeping up with automotive trends as well as keeping ahead of upcoming technologies.
PSA Groupe is mainly a European OEM consisting of mostly French auto manufacturers, but also newly acquired German Opel from General Motors and British Vauxhall from General Motors. The main OEMs of PSA Groupe consist of Peugeot, Citroen and the upscale DS brand. Some of us here may remember those 4 European manufacturers as well. Peugeot and Citroen sold cars here in Canada up until about 30 years ago. Vauxhall and Opel sold some of their line of vehicles here in Canada through the 60s and 70s in Pontiac and Buick stores. More recently, competitor Buick also shared much of GM’s Opel architecture here with the Encore, Regal and the former Verano. PSA Groupe is a company that has been much more successful within Europe, owning a large share of European auto sales, successful and profitable small and midsize vehicle platforms as well as some future technologies for electrification. While being a very successful and profitable company, PSA Groupe lacks a global presence as well as a presence within the crossover and SUV market.
With PSA Groupe being successful in Europe and the already existing partnership with Fiat Automobiles, what does that mean for FCA? This merger will keep all 12 brands existing within the 2 companies as they all share very different personalities and hit different markets within age and within different regions. FCA has had a harder time staying profitable with small and midsize car platforms, mainly due to having few brands to spread the architecture around, but also due to being so strong in a market dominated by Crossovers and SUVs. The key to become more global is to develop a profitable platform and vehicle architecture for a wide array of vehicles, whether is be a crossover or smaller vehicle. With PSA Groupe, architecture can be spread across 12 brands to be more cost-effective and profitable. This also helps spread R&D money for vehicle updates, powertrain updates and electrification as well as autonomous technologies.
This will lead to quite a few possibilities within North America and the Global Automotive market. Peugeot and Citroen have been looking to make a North American comeback by 2026. Merging with FCA makes this even easier with an existing dealer network, existing R&D facilities and existing success. These two companies could potentially introduce vehicles that would slot where FCA currently does not have a vehicle. Powertrains will also gain more efficiency and expect more electrification and autonomous technologies between PSA and FCA. In the global market, PSA is looking to gain more shares into Latin America, China and some of North America. FCA already has much of Latin America with the successful Jeep brand, however, FCA outside of Fiat has never been particularly successful in Europe. China is an untapped market for both OEMs in comparison to General Motors and Volkswagen.
Expect to see further announcements about the merger while everything is finalized over the next 12 to 15 months of this $50 billion merger. While FCA has many new releases already planned over the next 24 months, especially with Jeep, expect to see more in terms of electrification and the potential of Peugeot and Citroen returning much sooner. The company looks to eventually put 2/3 of its vehicles on 2 platforms as well as maintaining a joint volume of global sales of about 8.7 million vehicles annually. This merger is a win for both parties and on a global scale as well. The future is very bright for PSA Groupe and FCA.
Written by David Murphy