Car Maker Mega-mergers Based On Mutual Weakness Are Inevitable
Car companies have always needed to be big to compete, aside from a handful targeting small numbers of super-rich buyers with limited edition offerings. The increasing level of global competition and the particularly high importance of economies of scale in car manufacturing has gradually pushed them to merge with each other over decades. This consolidation into a smaller number of bigger companies accelerated in the years immediately following the 2008 financial crisis. We saw Volkswagen merge with Porsche in Germany, Nissan and Mitsubishi Motors in Japan and Italy's Fiat merging with American heavyweight Chrysler; to name but a few. The need to be big has gone up a couple of gears now though, and this week's news that Fiat Chrysler and Renault are planning to merge signals a new phase in this process is underway. Share The bigger issue, however, is climate change, more specifically the policy response to it from governments around the world.
At the same time, air quality has become a major issue too, affecting diesel cars that are better for the planet than petrol but worse for people's health. The clampdown on the worst polluting of cars, namely those with standard diesel powered engines, is already underway, with conventional petrol engines also in line for an ever-rising tax and regulatory squeeze until they are gone completely. This transition to cars which are green yet still commercially viable for mass market adoption is a daunting challenge for the industry and it is yet to be established when, or even if, it can be met. Another consequence of the green push towards electric vehicles is that it has put cars makers at the intersection of traditional industrial goods maker and innovative technology company. Elon Musk's Tesla is perhaps the most obvious example of a company straddling both the traditional manufacturing and tech sectors. But the long-established car makers are increasingly going to have to follow this path, as they race to develop the battery and engine technology that allows them to be simultaneously green and profitable, rather than one or the other.
To be successful they are going to have to innovate more than at any stage since the invention of the internal combustion engine. From investors' point of view this represents great opportunity, but also danger. The world needs vehicles, so there have to be some winners left standing, and shares in these companies will see new heights. On the way to establishing the survival of the fittest there will be a lot of casualties however both in terms of the companies and shareholders. Any big auto merger will inevitably have a strong political aspect and this is set to be ramped up with the Fiat Chrysler and Renault merger. Car makers are of huge symbolic importance as well as economic. The car is perhaps the most iconic and emotive of all manufactured goods. It represents independence, freedom and technological progress. It is certainly the highest price thing most of us will ever buy after any properties. The manufacture of vehicles is also highly political because they are crucial employers of mid and lower-skilled workers, even though the rise of robotics and automation in manufacturing has already started to cut heavily into this. We can expect to see politicians either pushing or opposing these deals even more so than the business figures involved with them. The temptation for many in the seats of political power will be to further blur the lines between the taxpayer-funded state and the private sector, and intervene based on the ballot box or geopolitical factors rather than business sense. Shareholders could easily get run over along the way. Whether European, American or Asian, car companies are set to become the front line soldiers in the trade war until peace is agreed, and the politicians will want them to be as big and strong as possible.
The X7 sits above the X5 in BMW鈥檚 wide-ranging SUV line-up, and here we鈥檙e testing the xDrive30d diesel model. It鈥檚 the 鈥榚ntry-level鈥?engine, and in M Sport trim, as tested, it costs 拢74,695. BMW鈥檚 CLAR platform provides the X7鈥檚 base, so some elements are shared with models such as the X5 and 5 Series saloon. The 7 in the name hints at a family link with the 7 Series saloon, so the firm has focused on boosting luxury in order to match its flagship limousine. Height-adjustable air suspension is fitted as standard; this means the car can be lowered to help with access and to improve aerodynamics, and lifted up to increase ground clearance. It鈥檚 four-wheel drive, like both rivals, so it can go off the beaten track, but there鈥檚 much less focus on its ability here than in the Land Rover. You can specify a 拢2,595 xOffroad package, which adds rough-terrain driving modes, a mechanical differential lock and a sump guard. Under the bonnet there鈥檚 a 261bhp 3.0-litre straight-six diesel engine, which powers the wheels through an eight-speed automatic transmission.