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PSA Group, Fiat Chrysler explore European venture

Milan

PSA GROUP and Fiat Chrysler Automobiles are exploring a partnership to share investments to build cars in Europe, according to people familiar with the talks.

The French carmaker and its Italian-American peer have been holding preliminary discussions to collaborate on a "super platform" - the basic underpinning of a car model - to reduce their investment costs in the highly competitive region, said the people who asked not to be named as the matter is private. Preliminary talks could be announced by the end of the first half, one of the people said.

PSA chief executive officer Carlos Tavares said earlier this month that his company is ready to seize opportunities for growth, less than a year after integrating the Opel and Vauxhall brands that it purchased from General Motors. Fiat Chrysler CEO Mike Manley said at the same time that he would "clearly look into" a deal that would make the Italian-American carmaker stronger, including an alliance or a merger.

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Any eventual partnership is likely to include sharing investments for new electric cars, the people said. The sale of electric vehicles is expected to boom globally to 60 million a year in 2040 from about 2.2 million in 2019, according to BloombergNEF estimates.

"No single car manufacturer alone can afford the sheer size of investments needed to develop platforms for the kind of smart, hybrid and connected vehicles that will hit the road in coming years," said Carlo Alberto Carnevale Maffe, a professor at Bocconi University in Milan. "Talks between PSA and FCA, as well as the one by BMW and Daimler, are a clear sign that the industry needs to find a new equilibrium of competition on final products and services, leveraging on inevitable cooperation in technology development and supporting infrastructures."

The partnership could eventually develop into a wider combination in the future, though the current focus is on the limited cooperation, two of the people said.

A spokesman for PSA declined to comment. BLOOMBERG