After the initial announcement, released in December 2019, the Fiat Chrysler Automobiles (BIT: FCA) and Groupe PSA (EPA: UG) are on a final runway of completing their merger. The two car giants are set to become the 4th largest auto-maker in the world on January 16th, standing behind Volkswagen (ETR: VOW3), Toyota Motor Corporation (TYO: 7203) and Renault-Nissan Corporation (EPA: RNO). The new car producing brand will be called Stellantis, which pushes the Ford Motor Company (NYSE: F) into 5th place globally. The two car makers worked closely with the French advertising and public relations company Publicis Groupe (EPA: PUB) in order to come up with a new name. The new alliance under a new name is set to create more competition in relation to the other world-renowned car manufacturers.
But, as we know, this merger comes as a necessity, in order to save the two struggling car giants, FCA and PSA. FCA, which own brands such as Fiat, Alfa-Romeo, Lancia, Maserati, Chrysler, Dodge and Jeep, has been struggling due too a fall in sales over the past few quarters because of the pandemic. PSA, which owns brands like Peugeot, Citroen, DS, Opel and Vauxhall, is also in the same boat, as its sales have diminished significantly over the past year, comparing to the years earlier. And if all that was still not enough, the two car makers are well behind in their development of more sustainable and efficient electric vehicles. This is something that the two sides agree on heavily, as the world is rapidly shifting to the usage of EVs.
The aim is not only to increase the presence and capture a bigger share of the EV market, but also to reduce costs. FCA and PSA are planning to create two new platforms for the new Stellantis vehicles, which should cover around two thirds of all cars produced by the joint venture. Although PSA sells slightly less vehicles than FCA, FCA is in a bit worse financial situation. Also, FCA needs to think where to find funds for paying out dividends to preference shares holders, not to mention the ordinary shares holders.
The new Stellantis alliance could be a great example of how two giants can come together and help each other, in order to tackle obstacles and adjust to the constantly changing environment. Whether this merger will prove to be successful or not, time will tell. The two car manufacturers will have to put a huge amount of resources into the development of more competitive electric vehicles. Despite the already well-established in the EV field companies like VAG Group, Toyota Motor Corporation or Tesla Inc (NASDAQ: TSLA), Stellantis will have to worry about new “rising stars”, such as Nio Inc (NYSE: NIO), XPeng Motors (NYSE: XPEV), Rivian, Workhorse Group (NASDAQ: WKHS) and Nikola Corporation (NASDAQ: NKLA). These new EV makers are already stepping on the heals of major manufacturers by creating competitive technology, this way attracting investment from around the world.
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