Fiat Chrysler-Renault Merger Could Kill Tesla, Jeep EV May Happen Soon

The nascent merger between Fiat Chrysler Automobiles N.V. (FCA) and Groupe Renault will give birth to a formidable competitor in the electric vehicle (EV) space now dominated by financially troubled Tesla Inc. whose survival is increasingly in doubt.

Analysts have said a combined foray into EVs by Renault and FCA is the key reason likely to push this mega-deal to fruition despite lingering uncertainties as to how this merger will play with the other members of the Renault-Nissan-Mitsubishi Alliance.

The merger’s aim will be to generate economies of scale that can slash manufacturing and development costs. Sharing the massive development costs of producing EVs and their complex and expensive battery packs may be another key objective for both firms, notes sources.

Then, there’s the shared aim of sharing costs and pooling resources to advance the development their self-driving cars. Both firms are struggling with their own autonomous vehicle programs, especially FCA. GM and Waymo have a huge lead over both FCA and Renault in self-driving cars. And, of course, there’s Tesla.

It’s well known Renault’s EV program is more advanced than FCA’s. Neither firm, however, is a leader in EVs, which is the territory of Tesla. A possible initial project for the combined firms will be getting an EV into the United States.

Analysts note FCA has long wanted its own EV in the U.S. and Renault can help do just that.

"Everyone assumes they’ll need electrification to get to the future targets, but we don’t know what the future targets are going to be," said Kristin Dziczek, vice president of industry, labor and economics at the nonprofit research firm Center for Automotive Research, told USA Today.

An all-electric Jeep seems a tempting option and is almost certainly in the cards somewhere up the road should the merger push through.

On Monday, FCA made public its proposal to merge with Renault in a 50-50 deal that will change the global automotive landscape by creating the world largest carmaker. Renault on the same day issued a statement saying it’s “studying with interest” the terms of a proposed merger with FCA.

FCA owns Jeep, Ram, Dodge, Chrysler, Maserati, Fiat and Alfa Romeo.

“After careful review of the terms of FCA’s friendly proposal, the board of directors decided to study with interest the opportunity of such a business combination, comforting Groupe Renault’s manufacturing footprint and creating additional value for the Alliance,” said Renault in a statement.

“A further communication will be issued in due course to inform the market of the results of these discussions, in accordance with applicable laws and regulations.”

FCA has spent years searching for a partner and now seems to have found the right fit with Renault.

“If there’s a partnership, merger, relationship that makes us stronger, then I’m absolutely open to looking at it,” said FCA CEO Mike Manley.