Curtis Hutchinson: Joined-up thinking?
What should fleet professionals make of the current round of mergers, collaborations and joint ventures in the OEM world?
The recently mooted merger between Fiat Chrysler Automobiles (FCA) and Renault looked like a done deal. That was until it crashed and burned just days after the formal announcement.
The merger was always going to be a challenging deal to pull off with FCA as the senior partner and Renault’s majority shareholder being the French government. Ultimately, despite assurances, the politicians were nervous of sanctioning a deal which has the potential to lead to job losses in France somewhere down the road.
There was also the matter of buy-in from Renault’s alliance partners Nissan and Mitsubishi, a partnership already strained following the arrest of its architect and global boss Carlos Ghosn.
Alliances, mergers and acquisitions amongst OEMs is, of course, nothing new. Consider Ford’s short-lived push upmarket when it owned Aston Martin, Jaguar, Land Rover and Volvo; Daimler and Chrysler’s ill-fated coming together and subsequent divorce, prompting the American giant to swoop on the Fiat Group; and who can forget BMW Group’s troubled ownership of Rover?
While all these marriages failed, others have succeeded. The once individual brands – VW, Audi, Škoda and SEAT – sitting under the Volkswagen Group umbrella have reaped the benefits of a benevolent parent, central control and shared platforms.
More recently, PSA’s acquisition of General Motors’ troubled European operations has seen a surprise return to profitability for the Vauxhall/Opel business. The smart money is now on PSA making a move on Jaguar Land Rover, the luxury business turned around by Indian giant Tata Motors, but now dragging down its parent after the global decline of the diesel sector and the weakening of the all-important Chinese market.
Meanwhile, alliances between unlikely bedfellows are now becoming commonplace. Earlier this year Ford and Volkswagen started collaborating on shared platforms for vans and pick-ups, promising future joint development on EVs and autonomous vehicles.
Perhaps the most unlikely joint venture to date saw the recent coming together of BMW Group and Daimler, owner of arch-rival Mercedes-Benz. This project will see the carmakers jointly invest over €1bn to develop a digitally driven “mobility services portfolio” aimed at taking on the likes of Uber and a host of other upstart tech companies, spanning ride-hailing, car-sharing, autonomous cars, electric scooters, electric car charging and parking services.
This ambitious project was one of the last overseen by Daimler boss Dieter Zetsche, and his comments surely echo the sentiment expressed in carmaker boardrooms around the world: “By creating an intelligent network of joint ventures, we will be able to shape current and future urban mobility and draw maximum benefit from the opportunities opened up by digitalisation, shared services and the increasing mobility needs of our customers. Further co-operations with other providers, including stakes in start-ups and established players, are also a possible option.”
The benefit for fleets of this and other OEM collaborations based around mobility services could be significant as employers increasingly look to offer staff more flexible transport options.
The race to deliver mobility solutions has become a guiding principle for carmakers. But the shift requires massive investment; the days of OEMs being monolithic cash generators ended with the financial crisis.
Carmakers face unprecedented investment requirements as they rethink their business models to address the impact of stricter regulatory controls on emissions; the development of new technologies to deliver autonomous vehicles; and the transitional shift towards electrification. All of which come with hefty price tags for heavily indebted OEMs, who can no longer afford to go it alone.
While autonomous vehicles are a hot topic, the biggest immediate talking point in the automotive industry is electrification. OEMs can no longer pay lip service to this technology as governments move to outlaw sales of new cars powered by internal combustion engines over the next couple of decades.
The trouble is no-one has yet found a way to make EVs cost-effective for all stakeholders. Consumers do not want to pay the higher prices currently being charged, while OEMs do not make a return on their massive investments in R&D and production. Indeed, a vital part of FCA’s failed merger plans with Renault would have been the opening up of access to the EV technology and platforms it lacks.
OEMs face a one-off opportunity to reinvent themselves. As a result expect to see more entering joint ventures with rivals and acquiring tech companies, as they chase the delivery of electrification and mobility solutions.