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Fiat-Renault proposed merger: Muted impact on India operations

If the companies manage to reach an agreement, the combined entity is poised to become the world’s third-largest automaker.

, ET Bureau|
Updated: May 28, 2019, 12.46 PM IST
FCA has a 0.5% passenger vehicles market share in India with its Jeep brand, while Renault fares better at 2.4%.
MUMBAI: Italian-US auto manufacturer Fiat Chrysler Automobiles (FCA), which owns global brands such as Jeep and Maserati, on Monday delivered a non-binding letter to the board of France’s Groupe Renault proposing a combination of their respective businesses as a 50/50 merger.

If the companies manage to reach an agreement, the combined entity is poised to become the world's third-largest automaker, with annual sales of 8.7 million vehicles, FCA said in a release. The impact of the alliance in India, however, could be muted, experts said.

FCA has a 0.5% passenger vehicles market share in India with its Jeep brand, while Renault fares better at 2.4%.

“The market here for these brands is really insignificant in the global perspective,” said Avik Chattopadhyay, co-founder of brand strategy firm Expereal. The focus of the alliance would be to set the Europe and the US markets in order first, followed by other more important markets like China, Russia and Brazil, he said.

When it comes to India, the alliance can take advantage from the rationalisation of manufacturing assets and sharing of new technologies, according to VG Ramakrishnan, managing director at Avanteum Advisors LLP.


The Renault-Nissan alliance has an underutilised manufacturing facility in Chennai which has a maximum capacity of 4.8 lakh units per annum. Both the companies, put together, manufactured only 1.84 lakh vehicles at this facility last fiscal, two-fifths of which were exported, as per data from the Society of Indian Automobile Manufacturers.

FCA, in turn, has a jointly-owned manufacturing facility with Tata Motors at Ranjangaon, Pune, the capacity of which it is looking to expand.

Renault is also a pioneer of electric vehicle technology globally, expertise that FCA can leverage.

The alliance can also benefit from a lower cost of procurement with their combined purchasing and can also work on making their sales networks lean, Chattopadhyay said.

Renault and FCA have complementing product portfolios in India. Renault sells more affordable cars in India, starting from about Rs 3.5 lakh for the Kwid to upwards of Rs 12 lakh for the Captur. Meanwhile, FCA’s Jeep line-up starts upwards of Rs 18 lakh.

With product lifecycles getting shorter and technology evolving much quicker than in the past, automobile manufacturers the world over are looking for strategic alliances to hedge the costs of developing new technologies. Alliances also help manufacturers reduce the cost of procurement of parts and enter each other’s strong markets, as in the case of FCA (with its strength in North America) and Renault (strong in Europe).

Suzuki and Toyota too have a global alliance, while closer to home, Mahindra and Ford are working on alliances to leverage each other’s strengths. These companies remain separate entities, however.

The board of Renault has not responded to FCA’s proposal as of press-time on Monday.

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Exports help Renault-Nissan buck trend, grow production

Renault India sales volume hit by slowdown

Renault unveils updated Kwid, price starts at Rs 2.83 lakh

Renault bets on new MPV and SUV to drive growth

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