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Fiat Chrysler Automobiles (FCA) and French auto conglomerate PSA Group, which owns Peugeot, have reached a $48 billion merger deal, according to The Wall Street Journal. The 50-50 merger would create the world's fourth-largest automaker, accounting for 8.7 million annual vehicle sales. Business Insider Intelligence

The merger isn't a done deal, as it still faces regulatory hurdles, something that has dashed such mergers in the past. For example, a planned $35 billion merger between FCA and Renault earlier this year was scuttled after the French government, which owns 15% of Renault, interceded causing delays FCA found unacceptable.

The government also owns a 13.7% stake in PSA and could lead the merger down a similar path. However, given FCA's previous experience with regulators, the companies may be able to better navigate or preempt regulatory hurdles, and likely made concessions that increase the likelihood of the merger going through.

Among the top benefits of an FCA-PSA merger are the massive potential cost savings for the newly created company. The merger is expected to result in annual savings of around $5.6 billion, as the company can cut redundancies by combining R&D efforts and consolidating supply chains, for instance. Additionally, the combined company's larger size and higher potential sales volume would give it better bargaining power and help it strike more favorable deals with suppliers.

The merger would also better position the combined company to adapt to the changing auto industry as manufacturers invest in electric vehicles (EVs). Both FCA and PSA have trailed rivals like Volkswagen in EV development, though they've made recent strides to embrace the shift. In June 2019, FCA signed EV charging deals with utility companies Enel X and Engie, and in July, it announced a $788 million investment in developing and producing the next-generation Fiat 500e compact EV. And in January 2018, PSA committed to unveiling at least 40 EV models by 2025.

Joining forces would enable the two auto groups to pool resources to more efficiently develop EV solutions and catch up to rivals. The combined automaker could boast a diverse array of EV models — the entity would own brands ranging from SUV-maker Jeep to Italian sports car brand Maserati. A diverse EV lineup would help the merged automaker to capture a significant share of the growing number of EV sales — the global fleet of EVs will reach 130 million by 2030, up from just over 5 million in 2018, according to the International Energy Agency.

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