May 29, 2019

The geopolitics of the auto industry

Illustration: Sarah Grillo/Axios

Car companies aren’t just big business, they’re national champions. And sovereign governments are increasingly driving the evolution of the industry.

Why it matters: Carmakers are pooling resources to make expensive bets on electrification, automated vehicles and shared mobility. But with jobs and a reputation for innovation at stake, every country wants to see their homegrown industry lead the way into the future.

Driving the news: Fiat Chrysler (FCA) is proposing a 50-50 merger with France's Renault, creating the world's third-largest automaker, behind Volkswagen and Toyota.

  • The new company would combine Renault's expertise in electric cars with FCA's partnerships in self-driving vehicles, including Waymo and Mobileye.
  • By combining vehicle platforms and other engineering efforts, the companies could save 5 billion euros annually ($5.6 billion), FCA projects.
  • There's minimal overlap between the two companies: Renault is strong in Europe, whereas FCA is strong in the U.S. and Latin America. And together, they'll be better positioned to grow in China.

Political considerations were obvious in the merger proposal from FCA, which signaled it wasn't going to close plants or lay off workers, even though many plants in Europe aren't running at full capacity.

  • The French government, whose 15% stake in Renault would be cut in half under a merger, would never go along without that commitment.

The trend: The U.S. government sold Chrysler to Fiat. The Japanese government removed Carlos Ghosn as chairman of Nissan (which helped topple him as CEO of Renault, too). The Italian and French governments have encouraged the proposed merger between FCA and Renault.

And the Chinese government, which brokered the takeover of Volvo, is now dictating an electric future.

  • "China's ambition - and it is impossible to separate companies from the government - is to not only be the largest automotive industry but to accumulate the greatest leverage," says China auto industry specialist Michael Dunne, CEO of ZoZoGo.
  • That means setting the global standards for future vehicles. "If you would like access to our market, the world's largest, here are the new rules. Take them or leave them." 

The bottom line: There are undeniable economic imperatives driving the consolidation of the auto industry. But the hands on the wheel don’t belong to shareholders.

Go deeper

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 4:30 p.m. ET: 1,579,690 — Total deaths: 94,567 — Total recoveries: 346,780Map.
  2. U.S.: Total confirmed cases as of 4:30 p.m. ET: 452,582 — Total deaths: 16,129 — Total recoveries: 24,790Map.
  3. Public health latest: U.S. has expelled thousands of migrants under coronavirus public health orderDr. Anthony Fauci said social distancing could reduce the U.S. death toll to 60,000.
  4. Business latest: The Fed will lend up to $2.3 trillion for businesses, state and city governments — Another 6.6 million jobless claims were filed last week.
  5. World latest: Boris Johnson is moved out of ICU but remains in hospital with coronavirus.
  6. In Congress: Senate in stalemate over additional funding for small business relief program.
  7. What should I do? Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Biden rolls out new policies in effort to court Sanders supporters

Photo: Scott Olson/Getty Images

The Biden campaign announced two new policies on Thursday on health care and student debt that are squarely aimed at appealing to supporters of Bernie Sanders, who ended his campaign for the Democratic nomination on Wednesday.

Why it matters: The policies don't go as far as Sanders' platform, but they signal that Biden is serious about incorporating elements of his former rival's agenda in an effort to help unify the Democratic Party and defeat President Trump in the general election.

Reports: Saudi Arabia and Russia reach major deal to cut oil production

Photo: Joe Klamar/AFP via Getty Images

OPEC+, led by mega-producers Saudi Arabia and Russia, reached a tentative agreement Thursday to impose large cuts in oil production as the coronavirus pandemic fuels an unprecedented collapse in demand, per Bloomberg and Reuters.

Why it matters: The revival of the OPEC+ collaboration patches up the early March rupture between the countries, which had pushed already depressed prices down much further by threatening to unleash even more new supplies into the saturated market.