Fiat Chrysler Automobiles (FCA) and PSA Group officially merged last month to create Stellantis, the fourth largest automotive group in the world with 14 car brands (including Abarth, Alfa Romeo, Citroën, DS, Fiat, Jeep, Peugeot and Opel/Vauxhall), under its umbrella. Three of those brands – Fiat, Jeep and Citroen – are here in India and though their presence is limited, this mega-merger throws up tantalising possibilities.
It is unlikely that Stellantis will bring back the Fiat brand (discontinued by FCA India in 2019) any time soon and will instead focus on synergies between Citroen and Jeep. For Jeep, Stellantis presents a fresh opportunity to develop the long-awaited compact SUV for India that FCA has been evaluating for several years.
The multi-brand Stellantis, with more than 400,000 staff, industrial operations in more than 30 countries and revenues of more than £150 billion (Rs 1,358,850 crore) combined, will leverage its size and economies of scale and is targeting annual synergies of more than 5 billion euros (Rs 41,335 crore).
Jeep compact SUV: the challenges
Jeep’s India portfolio currently starts with the Compass midsize SUV, priced at Rs 16.99-28.29 lakh (ex-showroom, India). In order to expand its footprint, the company has been looking at entering lower, but more volume-driven SUV segments in our market. As such, FCA had planned to launch an Indian derivative of the Renegade, but to make it price competitive in the hotly contested compact SUV segment involved serious re-engineering, like trimming the Renegade’s 4,230mm length to under 4 metres and heavy localisation, all of which needed considerable investments.
Plans to downsize Fiat’s in-house 1.6 diesel to under 1.5 litres (to take advantage of the ‘small car’ tax benefits in India) also fell through when both Tata Motors and Maruti Suzuki ditched Fiat powertrains for their own in the shift to BS VI. For FCA to develop the 1.5 diesel just for Jeep, the volumes were simply unviable.
FCA has also been struggling to find a suitable petrol engine for the India-spec Renegade as well. The 118hp, 1.0-litre, three-cylinder turbo-petrol on the Euro-spec Renegade would have been the best option, given its sub-1.2-litre cubic capacity, which qualifies for the ‘small car’ category. However, for this engine to be cost-effective, it would have to be manufactured in India; but again there was no business case, given the Renegade’s limited sales potential.
Importing the engine was also ruled out because the high customs duties on a high-tech direct-injection turbo-petrol can be eye-wateringly expensive. That’s the main reason why Ford dropped its celebrated 1.0 EcoBoost engine from the EcoSport.
To have a fighting chance in the overcrowded compact SUV space, the starting point has to be the lowest possible cost base. And that’s where access to PSA for joint-sourcing of components and technology comes in.
Citroen compact SUV: the solution
Citroen’s second model (after the C5 Aircross), and its first mainstream one for India, is a compact SUV (codename: C21) due in early 2022. The C21 is built on PSA’s Common Modular Platform (CMP), which shares componentry across a wide range of models to bring economies of scale.
Benchmarked against the likes of the Maruti Suzuki Vitara Brezza, the C21 is being engineered to meet brutally aggressive cost targets, and to achieve this, PSA will start production with over 90 percent of locally sourced parts, including the engine. PSA and Indian partner Avtec have set up an engine plant – PSA AVTEC Powertrain –in Hosur, Tamil Nadu, with a manufacturing capacity of more than 15,000 engines a month.
The C21’s platform could be exactly what Jeep needs, as it is value-engineered for the Indian market and comes with locally sourced engines. This would give Jeep substantial cost savings in the development of its own compact SUV, as the investment needed would essentially be just for a ‘top hat’.
With Stellantis finally a reality, FCA India’s president and managing director, Partha Datta, confirmed to Autocar India that the Jeep compact SUV is back on the table. “I am going to go out on a limb and say that I am laser-focused on getting the sub-four-metre Jeep to the Indian market. This is being actively developed and is part of the roadmap for the product onslaught that we have. The product architecture and feature content are being fine-tuned because of the recent developments,” he said, strongly hinting that the Jeep compact SUV will use the CMP architecture. The higher economies of scale achieved along with Citroen will significantly drive down costs. It’s a classic win-win for both brands and the fundamental reason why mergers like Stellantis happen. However, for the Jeep brand there could be a price to pay.
Jeep’s conundrum with tech sharing
The CMP platform doesn’t support a 4x4 driveline, so the question is, will Jeep sacrifice 4x4, which is at the very core of the Jeep brand, just to be price competitive? For a company that has always had a 4x4 variant in all its models since it was founded 80 years ago, that’s a tough question to answer.
Also, the Citroen C21 is set to be powered by a 1.2-litre turbo-petrol engine that will likely be shared with Jeep. However, the French brand has confirmed that it will give diesels a miss for its mass-market range in India. Can Jeep afford a similar move, especially considering that segment rivals like the Kia Sonet and Hyundai Venue have cashed in on a considerable demand for diesels?
Another question that has no immediate answer is when will FCA and PSA merge in India? It may not be for a while, and both FCA and PSA are likely to continue independently in the near term until some issues like sharing of capacity, product development and finances are addressed.
On the capacity front, FCA should ideally buy out Tata Motors' 50 percent share in the Ranjangaon, Maharashtra plant, to clear the decks for PSA. However, the exit clause in the contract has set an astronomical sum for either shareholder to buy out the other, which neither can afford. PSA’s plant in Thiruvallur near Chennai, with a capacity of 100,000 units a year, will be mopped up by Citroen alone. Hence, it will be a while before we see capacity sharing between FCA and PSA India.
PSA boss Carlos Taveras, and now the CEO of Stellantis, is understood to be concerned about FCA’s profitability in India. Consolidating the finances of both FCA India and PSA India into a single, combined account could have a bad financial impact on PSA’s books and that’s not something the Citroen team is comfortable with either.
Also, Stellantis has more important fires to douse than the cash burn from the relatively small India operations. A troublesome Chinese market, excess overcapacity and the billions needed to fund future tech for all the Stellantis brands is a bigger headache for Tavares.
Brighter India prospects for Jeep
What’s clear is that Jeep, which was at a crossroads in India, now has a better future and it’s no coincidence that Jeep’s announcement of bringing four models into India was soon after the Stellantis merger.
Sharing platforms with Citroen will give Jeep its best chance for a crack at the sub-four-metre SUV category which, in recent years, has seen competition pour in with the likes of the Sonet, Venue, Toyota Urban Cruiser, Mahindra XUV300, Tata Nexon, Maruti Vitara Brezza and the Ford EcoSport. The exercise of lowering costs will also prove essential, since the segment also includes the keenly priced Nissan Magnite (starting at Rs 549,000, ex-showroom, India) and the soon-to-be launched Renault Kiger which is being touted to be the most affordable model in the class.
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