Fri | Aug 23, 2019

Why your next Jeep could be electric - What Fiat Chrysler-Renault merger means for you

Published:Sunday | June 30, 2019 | 12:16 AM

Ready for an electric Jeep? A budding deal to combine Jeep maker Fiat Chrysler Automobiles (FCA) and French automaker Renault could make that possibility a reality in the coming years.

After years of searching for a partner, Fiat Chrysler may have finally found the one.

Less than a year after the death of consolidation promoter and Fiat Chrysler saviour, Sergio Marchionne, a merger of Fiat Chrysler and Renault is on the verge of happening.

Fiat Chrysler last week unveiled its proposal to combine the two companies in a 50-50 deal that would carry seismic consequences for the global automotive business.

Here’s how it could affect American car shoppers:

1. Electric vehicles on the way

Fiat Chrysler is badly lacking electric vehicles in America. Renault could help with that.

“I think from the FCA side of things, clearly, they have been substantially behind” on electric vehicles, said Jeff Schuster, president of global vehicle forecasting at LMC Automotive. “This definitely gives them access to go through Renault’s activity, which has been pretty strong in this area.”

Electric vehicles are expensive to develop. They need an entirely different type of engineering in certain ways, such as ensuring the right interplay of advanced batteries and electric motors.

They also require investments in a supply chain that looks a lot different from the typical supply chain for vehicles with internal combustion engines. The supply of battery cells, for example, is particularly challenging.

Another reason electric cars are key to the deal: fuel economy standards. Fiat Chrysler has a line-up full of SUVs and trucks.

“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, labour and economics at the Center for Automotive Research.

Don’t expect an electric Jeep immediately. But since the average vehicle is on the road for 11 to 12 years, that electric option could be available the next time you hit the dealership.

2. Self-driving cars are coming ... at some point

The maker of Jeep, Ram, Dodge, Chrysler, Maserati, Fiat and Alfa Romeo vehicles is widely believed to be several steps behind the industry’s leading players on self-driving cars.

The company “has limited in-house know-how and has invested less than peers in the space,” UBS auto analyst David Lesne said on May 22 in a research note, saying that the self-driving car revolution would affect Fiat Chrysler negatively.

Alphabet Inc’s Waymo, otherwise known as the former Google self-driving car company, and General Motors have a big lead, analysts say.

With their powers combined, Fiat Chrysler and Renault would have more financial resources to invest in expensive autonomous vehicle technology.

Self-driving cars require new components, advanced software and intricate sensors – all of which require expensive investments and drain the bottom line. Neither Fiat Chrysler nor Renault can do it on their own. Together, they might have a shot.

That doesn’t mean you’ll be riding in a driverless Jeep within the next few years. The technology continues to face substantial hurdles, including technical issues and regulatory roadblocks.

UBS projected that so-called ‘robotaxis’ will represent five per cent of new-car sales in 2030.

3. Renault cars coming to America?

This was out of the question until now. Renault has no presence in America after leaving the market decades ago.

Now, it’s suddenly at least theoretically possible. Whether it’s necessary is another question, since the type of passenger cars that Renault sells are performing poorly in the United States.

Plus, “a lot of folks aren’t familiar with their brands,” Dziczek said.

It’s more likely that Fiat Chrysler could use some of Renault’s vehicle platforms to build new models for the US and save costs in doing so.

But selling cars in the world’s most lucrative automotive market could prove to be a tantalising prospect to the French automaker.

Now’s probably not a good time to try. Not with the Fiat brand flailing and gas prices comfortably below US$3 per gallon.

But if gas prices spike again and Americans regain their love of small cars, Fiat Chrysler could embrace the Renault brand by importing small cars to America to fill the gaps in its SUV- and truck-heavy line-up.