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Fiat Chrysler seeks a merger with Renault

Will Renault merge with Fiat Chrysler ?

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It might be one of the biggest announcements over the past decade in the automobile industry: Italian-US group Fiat Chrysler reportedly proposed merging with French car manufacturer Renault.

With a century old expertise, Renault has been catching both the public eye and the attention of the most performative car designers with its large R&D center and innovation-driven technologies.

playbook 2019

However, French officials rose concern over the transaction and suspect Fiat Chrysler to plan a massive layoff in an already very hindered industry in France. Bruno Le Maire, France’s economy minister, required “guarantees” to the Italian-US group to validate the offer.

At the moment, the French government owes about 10% of Renault. On the other hand, Nissan executives expressed worries as in case of a merger, Nissan would only own 7% of Renault instead of 15%. 

The potential upcoming company would be based in the Netherlands and could be listed both on Milan, Paris and New York stock exchanges. 

Third largest car group in the world

On May 27th, Fiat Chrysler Automobiles announced that it sent a “non-binding letter to the Board of Groupe Renault proposing a combination of their respective businesses as a 50/50 merger settled in the Netherlands”, according to a press release published on the same day.

Fiat Chrysler said that merging with Renault would make it the third biggest global automotive manufacturer with 8.7 million vehicle sales a year. For the past decade, the world’s oldest car manufacturers have faced a historical crisis and are currently pressured to consolidate an industry shift to the new electric car era.

As the BBC reports, FCA explained that “the planned merger would create a ‘world leader in the rapidly changing automotive industry with a strong position in transforming technologies, including electrification and autonomous driving'”. 

Right after the announcement, Renault’s shares rose sharply from €56.85 to €57.51. However, Nissan executives were not pleased: if Renault merges with Fiat and Chrysler, Nissan will only own Renault at 7%, instead of 15% as of today.

A €5 billion saving

Renault has been considered as one of the most innovative car manufacturers in the world. From electric to hybrids via self-driving vehicles, Renault has managed to hire world’s top researchers and car designers.

According to Fiat Chrysler’s numbers, the merger would be able to save €5 billion a year by sharing development costs on innovation and R&D centers. Here are a few projects Renault has recently done:

  • Renault’s Trezor was unveiled at the French national car show in 2016. A 100% sports car with 350 horses that can go from 0 to 100 kilometers an hour in less than 10 seconds.
  • While it is not available for purchase yet, its rear lights have been implemented on the latest Renault’s Clio model.

  • Shown at the Geneva Motor Show last year, the Renault EZ-GO is an autonomous car that allows carpooling. It follows the manufacturer’s guideline: electric, connected and shared. Renault said it would launch the vehicle for sale from 2030.

  • Last but not least, the French company has, over the years partnered with architects and urbanism students to design innovative concepts. A marketing strategy that has caught the attention of the public eye. The “2020 Renault Float” are flying cars able to assemble and detach according to their destinations.

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An increasing competition

If the union between the Italian, the American and the French manufacturers is confirmed, it will aim to beat a new generation of car manufacturers who are more inclined to attract a younger workforce, more innovation-focused and more connected.

For example, companies such as Tesla have not only taken away thousands of customers, but also changed the way traditional automative manufacturers are designing cars.

Moreover, Internet giants such as Amazon and Google-owned Waymo are set to launch innovative cars in the upcoming months. While car pioneers are often indebted, the manufacturers located in the Bay area are likely to become the next car leaders.

According to experts, there is no doubt that this new generation could take over the car industry, as they are backed up by the most powerful – and connected companies in the world and are located in the Silicon Valley.

playbook 2019

 

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.