Research Overview

The proposed merger between Fiat Chrysler Automobiles (FCA) and the PSA Group will be one of the most significant mergers among automotive original equipment manufacturers (OEMs). The joint entity will be called Stellantis, and it will become the fourth-largest automotive OEM in terms of sales volumes. The new group will have a combined revenue of more than $180 billion and an operating profit margin of 6.8%. The expected synergy is approximately $4 billion. The combined annual R&D potential is more than $6.5 billion per year, which is a fair amount to invest in electrification and other technologies.

One of the most important outcomes of this merger is that Stellantis will become the largest van maker not just in Europe but across the world as well. In 2019, FCA and PSA (together) sold 1.12 million LCVs and vans, accounting for 13% of the global market share. The impact of this consolidation will be especially evident in Europe’s most profitable vehicle segment, that is, light commercial vehicles (LCVs) and vans. LCV demand has been increasing steadily over the past 5 years in Europe due to the high penetration of eCommerce. After integrating Opel-Vauxhall into its portfolio in 2017, PSA attained a leading position in the European LCV space. After this merger, FCA and PSA (together) will control more than 34% of the LCV market share in Europe. The future outlook is positive due to increasing orders from delivery service providers, which will further drive LCV demand in Europe in the near future.

More than sales volumes, the importance of LCVs for Stellantis lies in their profitability. LCVs offer lower production and development costs than passenger vehicles (PVs), resulting in higher profit margins in the range of 8-11% for OEMs. In addition, customers do not expect advanced technology features in vans, which further reduces production costs. Profitability also comes from shared platforms among OEMs, which allows for common parts and component sharing. This reduces the cost per vehicle for OEMs and raises profit margins. FCA and PSA have a 30-year joint development relationship in the LCV space; therefore, the synergies associated with shared van development already exist for Stellantis. PSA also produces LCVs for Toyota, and Stellantis will increase production capacity for Toyota to win merger approval from the EU. This can increase Stellantis’ market share up to 36%.