PSA Group and Fiat-Chrysler (FCA) have confirmed that they are in discussions to combine operations and create a leading global group.

In a statement PSA said: “Groupe PSA confirms there are ongoing discussions aiming at creating one of the world’s leading automotive Groups.”

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FCA had proposed a merger with PSA rival Renault earlier this year, but the discussions hit political obstacles and FCA withdrew its proposal.

However, industry analysts say that there are a number of drivers pushing the auto industry towards greater collaboration and concentration. In particular, heavy investments in advanced technologies such as automated driving and electrification can be shared. Also, scale economies and reduced cost are becoming increasingly attractive as companies look to position themselves for slower demand growth – or market contraction – in major global markets.

In 2018, FCA sold 4.8m vehicles and PSA 3.9m suggesting a combined company could be selling in the region of 8.5m units a year, making it the third largest global OEM after Toyota and Volkswagen (although the Renault-Nissan-Mitsubishi Alliance sold a combined 10.8m).

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PSA’s supervisory board is meeting today and it is highly likely the principles behind the proposed merger and talks timeline will be discussed.

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Some reports says that PSA CEO Carlos Tavares would lead the combined auto maker as its CEO, while John Elkann, FCA chairman, would become chairman.

FCA and PSA have an existing manufacturing cooperation in Europe where they have a long-standing and successful JV (Sevel) making light commercial vehicles.

See also: COMMENT – PSA and FCA merger makes sense for both