EU conditionally approves Fiat Chrysler and PSA merger

The European Union on Monday gave conditional approval to the mega-merger of car giants Fiat Chrysler (FCA) and Peugeot Citroen (PSA), after the firms agreed commitments to overcome competition fears.

“The approval is conditional on full compliance with a commitments package offered by the companies,” the European Commission said, in a statement.

The tie-up, which was announced late last year and planned to be completed in early 2021, will create Stellantis, set to be the world’s fourth-largest automaker in terms of volume, and number three in terms of sales.

The combined company unites brands such as Peugeot, Citroen, Fiat, Chrysler, Jeep, Alfa Romeo and Maserati into a global giant, each of which will continue under its own marque.

The European Commission said the decision to approve the deal came after it had carried out an “in-depth investigation” over concerns it might stifle competition.

Brussels was worried the merger could effect Europe’s highly-profitable market for vans, which are technically easy to manufacture but sell at good prices.

To assuage those concerns, the commission said PSA would continue an agreement with Toyota to manufacture vans to be sold under the Japanese brand in Europe.

The statement said that the new firm would also facilitate access for competitors to its van repair and maintenance networks.

“We can approve the merger of Fiat Chrysler and Peugeot SA because their commitments will facilitate entry and expansion in the market for small commercial vans,” EU competition chief Margrethe Vestager said.

“In the other markets where the two automotive manufacturers are currently active, competition will remain vibrant after the merger.”

Meanwhile, Tesla’s market capitalization surged above $600 billion, making the once wobbly startup founded by billionaire Elon Musk worth more than the five top-selling global vehicle making groups combined. The exclamation point came on Friday when Tesla rose to a record high in frantic trading ahead of the stock’s much anticipated entrance into the benchmark S&P 500 index..

For 2021, all signs point toward the industry accelerating its shift toward electrification, a turning point as historically momentous as the launch of Ford Motor Co’s moving assembly line for the Model T or General Motors ‘ 2009 bankruptcy.

Tesla’s ascent came the same year that activist hedge funds and other investors ratcheted up pressure on corporations to fight climate change. Evidence is growing that more investors have concluded the century-long dominance of internal combustion engines - “ICE” in industry slang - is headed toward a close within a decade.

From London to Beijing to California, political leaders also embraced plans to start phasing out internal combustion engine-only vehicles as early as 2030. Pressure to cut greenhouse gas emissions undermines the logic for significant new investments in ICE engines. Thousands of manufacturing jobs are currently tied to internal combustion in the United States, Britain, Germany, France, Japan and other countries.

Other powerful forces also shook the auto industry’s status quo this year. The COVID-19 pandemic stripped away the sales and profits that incumbent automakers had counted on to fund methodical transitions to electric vehicles. China’s rapid recovery from the pandemic exerted an even more powerful gravitational pull on industry investment. This was the year GM Chief Executive Mary Barra and other top industry executives began to echo Tesla’s Musk, saying electric vehicle battery costs could soon achieve parity with internal combustion technology. Still, it remained to be seen whether consumers, particularly in the United States, are ready to say goodbye to petroleum-fueled pickup trucks and SUVs.

The best-selling vehicles in the United States remain large, petroleum-burning pickup trucks. Demand for these vehicles powered a recovery for Detroit automakers after the pandemic forced factories to shut down in the spring.

The best electric vehicle and battery makers could field models that match internal combustion upfront cost as soon as 2023, brokerage Bernstein wrote in a report.

“ICE game over with BEV ~ 2030,” Bernstein’s auto analysts wrote, using the industry’s acronyms for internal combustion engine and Battery Electric Vehicle.

The shift toward electric vehicles is speeding a parallel transformation of vehicles into largely digital machines that get much of their value from software that powers rich visual displays and features such as automated driving systems.