France wants to create China-rivalling automotive supergroup

A plan to merge Renault with the parent company of Peugeot and Citroen to create one of the world's largest car makers appears unlikely to proceed.

A French-led supergroup of car brands has been widely speculated by European media, with reports suggesting the French Government is looking to merge Renault with Stellantis to compete against the rise of the Chinese automotive industry.

Stellantis is the parent company of 14 car brands – including Alfa Romeo, Chrysler, Citroen, Fiat, Jeep, Maserati, Peugeot, and Ram – and was formed following the merger of the Peugeot Group with Fiat Chrysler Automobiles (FCA) in 2021.

A merger between Stellantis and Renault Group would create one of the world’s largest car makers, with Stellantis already the world’s third-largest car maker behind Toyota and Volkswagen Group in terms of sales, and one of the most profitable manufacturers.

The French government owns 6.1 per cent of Stellantis and is also the largest stakeholder in the Renault Group, holding 19.73 per cent.

While the French government nor Renault have publicly commented on the speculation, Stellantis Chairman John Elkann firmly rejected the idea.

"There is no plan under consideration regarding merger operations with other manufacturers," said Elkann in a statement.

Elkann’s comments follow speculation by Italian newspaper Il Messaggero, as reported by Autonews, suggesting the French government was studying a potential merger between Renault Group and Stellantis.

The aim, according to Il Messaggero, was to counter increased competition from the German and Chinese car industries.

Automotive News reported talk of the merger was further fuelled by Stellantis CEO Carlos Tavares – who sits below Elkann – predicting an era of auto-industry consolidation was on the horizon. Tavares said Stellantis was “ready for any kind of consolidation” according to Reuters.

He pointed to the rise of Chinese car manufacturers, the European Union’s phasing out of petrol and diesel engines, as well as new costly union contracts in North America as determining factors.

The race to electrification would result in a ‘bloodbath’ between car makers, Tavares said.

Such a merger would have to pass anti-trust laws in Europe, while analysts suggest Renault combining with Stellantis would make no improvement to the European Union's excess manufacturing capability.

Renault is currently facing severe challenges after it stopped selling cars in Russia, which was second only to France in terms of sales volume.

Renault also sold a 5 per cent stake in Nissan at a $US1 billion ($AU1.54 billion) loss in late 2023 and cancelled plans to sell its Ampere electric car division, which saw Renault’s stock value fall dramatically in recent weeks.