Peugeot is likely to be next in the sector to look at a merger, the head of Fiat, which has in the past been seen as a possible partner for the French carmaker, said on Monday.

A French group, which has just tried (a merger) with Mitsubishi, and now will try with someone else, Sergio Marchionne said, when asked who might be the next candidates for a merger at the presentation of Fiat's Alfa Romeo Giulietta.

PSA Peugeot Citroen and Japan's Mitsubishi Motors Corp dropped efforts to set up a capital alliance last month but said they would continue discussing expanding business ties.

Peugeot declined to comment.

Last week, Peugeot's domestic rival Renault, Nissan and Germany's Daimler agreed to swap stakes and jointly develop cars in a tie-up that could mean combined savings of 4 billion euros ($5.44 billion)

Peugeot now wants global scale to become less reliant on stagnating European markets, where government subsidies are running out.

The car industry was badly hit by falls in demand during the financial crisis. In Europe, they were supported by government incentives to buy new cars but these are being removed and further consolidation looks inevitable.

Fiat took a 20 percent stake last year in U.S. car maker Chrysler, which Marchionne now also heads.

He said on Monday, Fiat ought to be able to raise the stake to 35 percent in two years after meeting conditions laid out by U.S. President Barack Obama's administration.

Peugeot and Fiat were once expected to try to seal a deal but protective family ownership in both companies ensured nothing happened.

Philippe Varin, who heads Peugeot, has said he would look at all opportunities that come up. But the Peugeot family, which has nearly 46 percent of voting rights, has said the group must retain its independence.

Marchionne said at the beginning of the global financial crisis that only carmakers able to sell 5.5 million cars and more every year would survive, setting a virtual benchmark for the industry.

He tried to buy Opel, the European operations of General Motors GM.N, in order to achieve that size but now thinks Fiat and Chrysler have what it takes to survive alone.

(Reporting by Alberto Sisto, additional reporting by Gilles Guillaume in Paris; writing by Jo Winterbottom; editing by Karen Foster)

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