18 Jun 2020
Posted in Automotive
PSA-FCA’s proposed merger just got messy and there’s no clear pathway out
Following the news that the European Commission (EC) is opening an in-depth investigation into the proposed PSA-FCA due to concerns over the merged company’s dominant market share in light commercial vehicles (LCVs);
Calum MacRae, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:
“The problem for the merger is that the LCV segment is already highly concentrated within Europe – there are far fewer brands competing in LCVs than there are in passenger cars. According to GlobalData’s European light vehicle production forecast there are 42 brands present in passenger vehicle production in the region, while for LCVs there are just 14 brands present.
“Any merger that proposes bringing together six of those brands – Peugeot, Citroen, Fiat, Ram, Vauxhall and Opel – is going to be up against it even on such a crude measure of market concentration.
“There’s already much that goes on behind the scenes to enhance the scale economies of competing in Europe’s LCV market with joint ventures and shared factories between different manufacturers.
“Extricating this complicated supply pattern into something that satisfies the EC is going to lead to plenty of head scratching.
“Possible solutions could involve ring-fencing brands so they compete in certain sub-segments, retiring some van making capacity or spinning-off and packaging one or more of the brands into a separate entity for later sale. However, besides Ram most are of a similar size in Europe and without the accompanying passenger vehicles neither would look particularly appetising to investors.
“None of the solutions looks particularly compelling and will be a bitter pill for PSA-FCA to swallow if the EC’s investigation finds that the merger does contravene competition policy.”