Carlos Tavares, chief executive of Groupe PSA (formerly PSA Peugeot Citroën), was already ambivalent about EVs. A few weeks ago, he said, “We are selling our electric vehicles to green addicts.” Fiat Chrysler has also been reluctant to invest in electric vehicles. But the planned merger between the two would have allowed them to share EV-development costs — and finally deliver electric cars on a large global scale.
But it now appears that negotiations to finalize the merger are being threatened by the coronavirus.
A merged PSA and Fiat Chrysler would have created the world’s fourth-largest automaker. The combined companies would oversee 14 brands, including Peugeot, Citroen, Opel, Fiat, Alfa Romeo, Maserati, Jeep, and DS.
Agence France-Presse (AFP) reports today that the tie-up, due to be finalized in early 2021, is facing challenges to the pandemic. An inside source said:
The two groups need this merger in view of the heavy investments that must be made in electric cars, but they must recognize that, in view of the economic situation, for the merger to take place, it will be necessary to review the initial financial terms.
The COVID-19 pandemic has shut down auto plants in Europe and the United States. The United Auto Workers today announced the death of two Fiat Chrysler factory workers who contracted the novel coronavirus.
Karl Brauer, an analyst at Kelley Blue Book, said that the financial terms for the merger now need to be reconsidered.
Assumptions about valuation of the companies, revenues projections, sales for 2020, and beyond for both companies, all those mathematical assumptions that were made during the talks essentially have to be re-evaluated now.
A PSA spokesperson told AFP that the merger still makes sense, and that it’s “inappropriate to speculate about any possible changes to the agreement.”
The merger was first announced in October. So it’s likely that the respective companies were already calculating how they could combine resources to expand EV production.
In 2018, Tavares said that all of its models would be “electrified” by 2025. Two years later, PSA reported sales from a single EV, the 50kWh Peugeot 208 EV. Nonetheless, Tavares believes the PSA Group is “on track” to meet its 2020-21 EU emissions.
Fiat Chrysler is partly relying on “pooled” purchased credits from Tesla sales in Europe to meet regulations. FCA does not have robust plans for EVs, so the merger with PSA theoretically could be a big help.
Tavares said the merged companies would source EV battery cells from two factories — built in a joint venture with oil company Total. These plants, expected to come online in 2023, aim to produce 1 million EV batteries per year by 2030.
For the US, Fiat Chrysler could bring two compelling types of EVs to market, beyond the Chrysler Pacifica Plug-in Hybrid, its only current plug-in model. It could offer the new and improved, longer-range 500e to American consumers, as well as the Centoventi, a compact EV with a unique add-on battery concept.
But the Jeep brand, with its rugged 4X4 capabilities, would be an even better match for Americans. The company’s five-year road map includes four pure electric vehicles and 10 plug-in hybrids, all by 2022.
We were already suspicious that Fiat Chrysler, including its Jeep brand, would deliver more than low-volume compliance EVs to the United States.
But the merger with PSA provided a glimmer of hope. There would be cost savings and shared battery production. It’s too early to write off the alliance, but if it falls apart due to the pandemic, the chances of Fiat Chrysler fulfilling its EV promises would be even less likely.
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