Fiat Chrysler-Renault Merger Points to High Cost of Developing Electric Cars

Should Americans care in the least if Fiat Chrysler Automobiles (FCA) merges with Renault, as is currently rumored? Should you get excited at the prospect of a, say, Renault Clio coming stateside, given that many American butts won’t fit on the seats of a 149-inch sub-subcompact hatchback?

Probably not, so let’s keep it simple: FCA is doing well. It has money to invest because two of its brands (Jeep and Ram) are kicking butt in sales. Grown men drooled seeing the 2020 Jeep Gladiator pickup at the various winter-spring auto shows. So that gives the London-based (don’t ask) FCA multinational the ability to go on a shopping spree. Or, at the very least, go window shopping.

What FCA wants is what Renault has: more of a head start in the EV business than either the F or C part has. Also, access to Renault may or may not mean access to Renault-partner Nissan, which is also a capital-P Player in EVs. It also means possible access to Mitsubishi, which, ah, well, sometimes you get puzzle pieces that don’t always complete the picture. Expect more alliances and mergers as automakers deal with the huge costs of electrification, as well as the need to work on higher levels of autonomous driving.

Under its new CEO, Mike Manley, Fiat Chrysler pledged to build cars, SUVs, and pickups using a wide range of powertrains: conventional gasoline and diesel, hybrids, plug-in hybrids, and pure electric vehicles. In March, Manley said FCA would develop opportunities “including at least four plug-in hybrid vehicles and the flexibility to produce fully battery-electric vehicles.”

2019 Renault Clio

But What About Nissan (and Mitsubishi)?

Remember the Facebook status box every teenager checked: “In a relationship and it’s complicated”? That box got ticked here, too. The Renault-Nissan-Mitsubishi Alliance dates to 1999 between Renault and Nissan, with Mitsubishi joining up in 2017. The three companies represent the world’s largest automaking alliance and sell 10-11 million cars a year (Nissan 6 million, Renault 4 million, and Mitsubishi 1 million a year ago). With 500,000 EV sales since 2010, they’re also the biggest player in electrification. (Tesla is at about 300,000, for comparison.)

The three automakers don’t own each other, but they have stock investments in each other: Renault 43 percent stake in Nissan (with voting rights), Nissan 15 percent stake in Renault (without rights), and Nissan a controlling stake in Mitsubishi. They control 10 brands: Renault, Nissan, Mitsubishi, Infiniti, Renault Samsung, Dacia, Alpine, Datsun, Venucia, and Lada.

Nissan Leaf: 400,000-plus sold.

While FCA seems to be interested in Renault’s EV savvy, it’s Nissan that sells way more EVs. The Leaf recently topped 400,000 sales on its own. Analysts have been busy deciding if they believe an FCA-Renault alliance is good for Nissan, or bad. Nissan sells more vehicles and has twice the market value. Nissan also has a significant self-driving effort and Nissan’s ProPilot Assist has been well received. Renault also doesn’t have many cars of interest to the North American market. The Renault Clio looks sharp, but critics say it’s short on interior space compared with competitors and the US isn’t dying (yet) for another Ford Fiesta kind of car.

The Renault-Nissan-Mitsubishi Alliance, before FCA came calling, had added an Alliance 2022 campaign to reach 14 million sales and $ 240 billion by 2022. But the iconic leader of the alliance, Carlos Ghosn, has been in or out of jail in Japan this year (the Japanese keep re-arresting him and he keeps posting bail, most recently in April) on charges of underreporting his incoming and misusing of company assets. Last November he was ousted as Nissan’s chairman. He previously had been chairman of Renault and since the early 2000s has had a reputation as a fierce cost-cutter and innovator.

2019 Ram 1500

Where Electrification Matters to FCA

Previously, Fiat Chrysler seemed most intrigued by electrification prospects in China, the world’s largest car market, with 28 million sales in 2018 versus 17 million in the US, and an even larger lead in air pollution so bad much of the populace complains. Now FCA apparently sees potential in the US.

Both the Jeep Wrangler and Ram 1500 offer gasoline engines with battery-assist 48-volt electric motors that function as economy boosters and also as e-turbochargers both on- and off-road. Several automakers such as startup Rivian, Tesla and now Ford are talking about electric-only pickup trucks and Ram is doing R&D as well. As a market, it will be small for some time. And for now, FCA needs to work with other automakers. The electrified vehicles include:

  • 2019 Jeep Wrangler

    Jeep Wrangler with a four-cylinder eTorque engine, FCA-speak for the 48-volt electric motor booster with a 0.4-kWh battery. It’s a $ 1,000 upcharge.

  • Jeep Renegade, Jeep Compass, and Jeep Wrangler, all with plug-in hybrid options in 2020. The Renegade and Compass target younger buyers, potentially more open to alternative drivetrains. Wrangler is the iconic Jeep flagship.
  • Ram 1500 pickup also with the eTorque motor/generator attached to the engine crankshaft, standard on the 3.6-liter V6, $ 1,450 on the Hemi V8. Continental supplies the liquid cooled motor for the V6, while Magneti Marelli supplies the Hemi’s electric motor.

FCA’s US EV sales have been modest. Green Car Reports last fall estimated that the EV version of the Fiat 500e EV has about 19,000 US sales over five years. FCA launched the 500e as a California “compliance car” to meet the state’s 2012-2017 zero-emissions-mandate. At some points during the period, FCA was offering the 500e at lease rates under $ 100 a month with little money down. That got you a car with a cramped cockpit and an 84-mile range. It sort of worked out for five years, but now buyers are looking for 150 miles of range and up.

FCA’s smaller, halo brands like Alfa Romeo are moving toward hybrids and plug-in hybrids because a) they have to to keep up with competitors, b) they have to keep up with fuel-economy standards, and c) the electric motors boosting hybrids act as additional turbochargers.

US tastes may be changing, and more accepting of EVs, primarily in urban areas. You’ll see more UFOs in heartland America than electrified Fiats. But the market is clearly looking for cars with ranges well over 100 miles. That’s where automaker partners come in. Thus FCA’s approach to Renault and discussions of a merger of near-equals.

From 2013 to 2018, Americans (on average) worried (very or somewhat) increased from 53% in 2013 to 69% in 2018. 95% of liberal Democrats are concerned and so are a third of conservative Republicans. (Source: Yale Program on Climate Change, George Mason Center for Climate Change Communication.)

The US Slowly Warms to Climate Change Concerns

Official Washington, the part in power right now, has mixed concerns about climate change, including the “what global warming, it was cold in May” school of thought. But surveys show America is changing. Much of the world has concerns about global warming coming from internal combustion engines. You can lick air pollution, but CO2 emissions — which link directly to how much fossil fuel comes out of tailpipes, regardless of how otherwise-clean the exhaust is — may be damaging the planet long term, and long term may soon be near term. That’s how they feel, as do people in coastal cities who voted for Hillary. Also, a lot of students and young people who may be around as long as the year 2100. Not so much conservative Republicans. Currently, seven in 10 Americans say they are somewhat or very worried about global warming. Five years ago it was just over half, according to a late 2018 survey.

So, there’s more reason for FCA to woo Renault (and maybe Nissan): access to more and better EV technology. As long as Jeeps and Ram pickup trucks are selling well, FCA has some money to spend.

Could we see more mergers and alliances? Quite possibly. Anti-trust regulators are less concerned about joint parts procurement, or things that may not be seen as cutting edge on the one hand (transmissions, infotainment). Automakers say they need the alliances and maybe mergers, such as Renault and FCA here. In the 1990s there was a belief an automaker needed to build 1 million cars a year to be in a survivable position. Now it may be 5 million.

The hottest rumor, and rumor is about all it is, is that Ford and General Motors might merge. Or ought to merge. The idea gained impetus with a May 30 story in MarketWatch that claimed a merger of the two is inevitable, mostly because MW doubts Ford can really bring to market the 40 hybrid and EV models it claims it can by 2022, and if it does, they won’t sell. Meanwhile, GM has issues but not at Ford’s level, and it has savvy in both electrification and self-driving. GM’s real ace in the hole is how well its cars sell in China. So far, most other media outlets have referenced the story without passing judgment on the odds it will happen. If it does, chalk it up to the high costs of developing next-gen technology, and ferocious competition from international automakers.

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