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Wall Street analysts say Tesla’s first-quarter deliveries were ‘substantially worse’ than expected

Tesla shares sink on poor deliveries — Watch four experts break down what's next for Elon Musk and the company
50 Mins Ago | 03:56

Wall Street analysts were very disappointed in Tesla's first-quarter delivery and production figures.

Shares of the company plunged 9 percent late Wednesday after Tesla said it delivered 50,900 Model 3 cars in the first quarter, below the 52,450 analysts expected in a consensus estimate from FactSet. Overall deliveries also fell short of consensus estimates.

The stock is still down over 9 percent in early trading to $265.35.

“Tesla's 1Q19 vehicle production & deliveries report was substantially worse than expected,” J.P. Morgan analyst Ryan Brinkman said in a note to clients.

“Altogether, we think the delivery results will put pressure on TSLA's shares, and corroborates our belief that volume expectations for the company's products in 2019 are too high with consumer demand likely lower as subsidies phase out in the US,” said Goldman Sachs analyst David Tamberrino who reiterated his sell rating. “Further, this likely puts downward pressure on our EBITDA and FCF estimates (as well as consensus) given the lower volume levels and worse utilization than anticipated.”

Here's what the analysts are saying about the Tesla delivery numbers:

J.P. Morgan- Underweight rating, lowering price target to $200 from $215

“Tesla's 1Q19 vehicle production & deliveries report was substantially worse than expected…Deliveries tracked just 63,000 units vs. JPM 70,500 and consensus as recently as March 27 of 74,930, suggesting materially less 1Q revenue, margin, and free cash flow… We believe the market postulated that if Tesla were to miss, it would be due solely to a materially greater than expected number of vehicles in transit (vehicles that could be sold in early 2Q, suggesting little need to lower full year estimates), but this appears to be only partly the case, with vehicles in transit at quarter-end totaling 10,600 vs. our estimate of 10,000, in our view implying lower underlying domestic demand…While most attention is being paid to the Model 3 ramp, deliveries of the higher price Model S & X declined substantially in 1Q, totally just 12,100 between them — less even than the Model S alone used to sell in some quarters preceding the full production ramp of the Model X, again in our view implying a deceleration in underlying demand unrelated to temporary delivery difficulties (maybe due to tax credit expiration?).”

Canaccord Genuity- Buy rating, lowering price target to $391 from $450

“While we were disappointed in the shortfall of deliveries in Q1 versus expectations, we continue to believe that the new lower-priced Model 3 variant will spur additional demand. Importantly, the company cited roughly two weeks of inventory in North America which may help temper concerns of an inventory build. We maintain our BUY rating given the overall opportunity that we see for Tesla and EVs in general, but are lowering our PT to $391 which is based upon 30x our new FY20 EPS of $13.05.”

Morgan Stanley – Equal-weight rating

“1Q19 is shaping up to be one TSLA may want to forget, but needs to explain to shareholders who own it as a LT disruptor. We felt the #1 2019 determinant for TSLA's share price was if it could prove to the mkt. it can be self-funding on a sustainable basis.”

Bank of America- Underperform rating

“Ultimately, given what appears to be slower than anticipated progress on the Model 3 production ramp, TSLA's past production/ logistics challenges on the Model S/X, and now potentially new challenges with deliveries to Europe and China, we expect it will take some time before the Model 3 production/sales reaches mass scale; and thus, costs related to the ramp and lower priced variants may outweigh potential benefits of operating leverage for some time. .. .Moreover, there still remain a number of major hurdles ahead for TSLA, including: 1) ongoing Model 3 production ramp and future operational challenges associated with expanding the product lineup; 2) what could be a very material cash burn in coming quarters (from ongoing delivery/logistic issues, Shanghai factory construction, etc.) which could pressure TSLA's liquidity even with recent capital inflows and require future capital raises; 3) faster than usual spike and burnout pattern for Model S/X; and 4) the prospect of new competition and longer term obsolescence. As such, we continue to question TSLA's longer term profitability, cash flow, and valuation.”

Goldman Sachs- Sell rating

“We think the disappointing results likely put pressure on consensus estimates for the full year especially for Model S/X deliveries (with company-compiled consensus for Model S/X deliveries at 91k and Model 3 at 282.5k versus an annualized rate of 1Q19 results indicating around 50k Model S/X deliveries in 2019 and 204k Model 3 deliveries). Further, we think the result likely fuels bearish investors' concerns about waning demand — especially as these disappointing results came even as the company expanded Model 3 deliveries internationally and began offering $35k variants of the Model 3. Altogether, we think the delivery results will put pressure on TSLA's shares, and corroborates our belief that volume expectations for the company's products in 2019 are too high with consumer demand likely lower as subsidies phase out in the US. Further, this likely puts downward pressure on our EBITDA and FCF estimates (as well as consensus) given the lower volume levels and worse utilization than anticipated. As a result, we reiterate our Sell rating on shares.”

Bernstein- Market-perform rating

“While we see myriad possible explanations for Model S and X weakness (reduction of US tax credit; phasing out of Dutch tax incentives; Q1 seasonality; model fatigue; incremental competition), we remain perplexed by the magnitude of the decline. Perhaps more importantly, our analysis suggests that non-in-transit inventory of S/X could be 15,000 – 20,000 units, or more than one quarter's demand. We found Model 3 deliveries less concerning, given (1) the high-end Model 3's unsustainably high U.S. market share in 2H 18 (33% of its segment) and (2) the invariable logistical bottlenecks that have emerged overseas (Tesla is now delivering 5x more cars internationally than it ever has before). We remain less worried about the key investor controversy of underlying Model 3 demand – our analyses suggest 400,000+ cars a year is very possible. We have lowered our estimates for S, X deliveries in 2019 to 68K from 80K, and expect Model 3 deliveries of 291K (vs. 295K). We forecast TSLA to use $1.1B in cash in Q1 (including $200M in restructuring expenses) and now model FCF of about -$200M per quarter in Q2 and Q3, and break-even in Q4 19. We model Tesla's Q1 ending cash balance at $1.7B. We believe that TSLA should have raised capital in the 2H18 and eschewed near-profitability to press its first-mover advantage & grow as quickly as possible in 19 and 20. It is now in the uncomfortable position of likely needing to raise capital from a position of relative weakness.”

Citi- Sell/High Risk rating

“Though Tesla bulls might look past the Q1 Model 3 miss, the S/X numbers will likely spark some legitimate demand & company margin concerns, particularly given the risk for some incremental cannibalization from the recently introduced Model Y. We expect the stock to come under pressure on this and perhaps test recent lows—maintain Sell/High Risk. A few implications from here: (1) First, it's setbacks like these that underscore the need for greater balance sheet cushion—after all Tesla's quarterly financial DNA now resembles far more “auto” than “tech”. Tesla noted that it had “sufficient” cash to end Q1, but we doubt the word “sufficient” will inject much comfort; in fact it might even draw more scrutiny to Tesla's balance sheet issues, in our view. (2) At the very least, Q1 deliveries will likely cause the bull camp to revisit assumptions about the NT demand trajectory. Tesla confirmed its 2019 delivery targets, which of course now look quite aggressive requiring ~100k deliveries on average in each remaining quarter. So demand will likely be scrutinized even more so, and the outcome in the coming months could meaningfully re-shape the entire Tesla bulls/bear debate.”

Baird- Outperform rating

“Model 3 deliveries were in line with our expectations but Model S+X deliveries missed both our and consensus estimates; TSLA indicated lower-than-expected delivery volumes and pricing adjustments are expected to negatively impact net income in the quarter. Additionally, a high number of cars in transit at the end of the quarter could impact cash flow, though the company indicated it had “sufficient” cash on hand at quarter-end. TSLA also announced it will host an investor day on autonomous driving initiatives on April 19.”

This is a developing story. Check back for updates.

Volkswagen begins testing automated cars in Hamburg

Volkswagen

Volkswagen has commenced testing automated vehicles in Hamburg, Germany. The tests, being carried out by Volkswagen Group Research, will see five e-Golfs take to a three kilometer section of road in the major port city.
The vehicles have laser scanners, radars, ultrasonic sensors and cameras. Test drivers will be behind the car's steering wheel at all times to monitor performance and take control of the vehicle in case of an emergency.
Volkswagen said that computing power “equivalent to some 15 laptops” has been installed in the e-Golf's trunk.
This, in combination with sensor technology, will enable the vehicle to collate data on everything from cyclists and pedestrians to other cars, rights of way and intersections. A range of artificial intelligence techniques, including deep learning and pattern recognition, will be used.
“The tests center on technical possibilities as well as urban infrastructure requirements,” Axel Heinrich, who is head of Volkswagen Group Research, said in a statement Wednesday.
A 9 kilometer “digital test bed” for both connected and automated driving is being built in Hamburg. It is set to be finished in 2020. Traffic lights in the city are also being updated in order to facilitate infrastructure-to-vehicle and vehicle-to-infrastructure communication.
Heinrich added that, to make driving safer and more comfortable, “vehicles not only have to become autonomous and more intelligent – cities must also provide a digital ecosystem that enables vehicles to communicate with traffic lights and traffic management systems as well as with one another.”

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GM sales fall, but buyers clamor for trucks and SUVs

John Gress | Reuters
Trucks come off the assembly line at GM's Chevrolet Silverado and GMC Sierra pickup truck plant in Fort Wayne, Indiana, July 25, 2018.

General Motors reported first-quarter sales on Tuesday that fell 7 percent from a year ago but said buyers are flocking to its more expensive sport utility vehicles and pickup trucks.

Transaction prices, the final sales price, on the company's newest pickups rose $8,040 compared with the outgoing models in the same quarter of 2018, reflecting the continued interest among buyers for well-equipped trucks. More than 96 percent of the GMC Sierra crew cab pickup, a four-door full-size truck, were sold with more expensive high-end trims.

Signs have shown that new car sales are slowing in the United States. Yet demand for trucks and SUVs, which tend to be more profitable, could buoy automakers and somewhat offset the effects of a slowdown. Trucks, SUVs and crossovers made up 80 percent of GM's sales, the company said.

The company said sales of smaller crossovers such as the Chevrolet Trax and Equinox, as well as its midsize Chevrolet Colorado pickup, all set first-quarter sales records, while the GMC Acadia SUV had its best quarter ever.

GM plans to launch more full-size pickups in the second half of the year with two new heavy duty pickups from Chevrolet and GMC.

“We are bullish on pickups and expect to gain sales momentum throughout the year,” said Kurt McNeil, vice president of U.S. sales operations. “We are installing capacity in Flint to build more HD pickups in total, more crew cab models, more dualies and diesel models, too, all in response to dealer and customer demand.”

However, sales of traditional passenger cars continued to slide, dragging down the automaker's total.

General Motors has undertaken a plan to reshape its business, including idling factories that produce slow-selling sedans and compact cars and consequently cutting 14,000 jobs at factories in the U.S. and Canada. The move has divided opinion. Supporters say the company is taking the necessary steps to improve profitability, but labor leaders and politicians from affected regions have criticized the decision.

Shares of GM have risen 5.6 percent over the last 12 months and are up by nearly 13 percent since the beginning of the year.

America is falling back in love with trucks and SUVs, and that's causing big changes at big car companies
10:38 AM ET Tue, 5 Feb 2019 | 04:45

Autonomous vehicle tests underway in London

FiveAI

Supervised autonomous vehicle tests have started in two London boroughs, according to a statement published Tuesday.
FiveAI, which specializes in areas such as autonomous vehicles, machine learning and artificial intelligence, said the trials, in Bromley and Croydon, represented a “significant next step towards launching autonomous, shared services in London.” The firm added that passenger trials were due to start in 2020.
Five vehicles will be used in the testing and are set to be on the roads both day and night. Safety drivers will be in the vehicles at all times and have the ability to take control of the cars if necessary.
In preparation for the trials, FiveAI undertook data gathering exercises in August 2018. Vehicles were driven around streets to gather data on things such as road user behaviour and road layout. The vehicles that will be used in the forthcoming tests will be clearly marked to let other road users know they are autonomous.
“All cities across the U.K., including London, need to understand the opportunities, risks and challenges they face when considering how transport will operate in the future,” Michael Hurwitz, Transport for London's director of Transport Innovation, said in a statement Tuesday.
Hurwitz added that while the outlook for autonomous vehicle technology was still uncertain, it had “the potential to significantly change travel.”

Over the last few years, the development of technology has led to several trial runs of autonomous vehicles.

In August 2018, for example, the Hyundai Motor Company announced that the first journey by an autonomous truck on a South Korean highway had taken place. The firm's Xcient truck, which has a maximum load capacity of 40 tons, drove around 40 kilometers between Uiwang and Incheon.
The vehicle used an autonomous driving system that allowed it to accelerate, decelerate, steer and maneuver through traffic without needing input from a human, although one was on board to take control as and when required.
In February 2019, the CEO of Arm Holdings told CNBC that it would be “a while” before self-driving cars became mainstream.
“It is a phenomenally hard problem to anticipate what a car could do under absolutely any set of circumstances,” Simon Segars, who was speaking to CNBC's Karen Tso at the Mobile World Congress in Barcelona, Spain, added.

“I think you're going to start to see early services, in quite a constrained way, quite soon over the next couple of years,” he added, explaining that there was “some way to come” before the technology was “completely mainstream.”

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US auto sales are falling as prices for new vehicles jump to highest ever

Getty Images
New Ford cars are displayed on the sales lot at Veracom Ford in Burlingame, California.

U.S. auto sales are falling as vehicle prices climb, indicating that buyers at the lower end are getting squeezed out of the new car market, according to a new industry forecast.

First-quarter auto sales are expected to drop by nearly 2.5 percent from a year earlier, to 4 million units, according to J.D. Power and LMC Automotive.

Retail sales, which exclude sales to rental car companies and other commercial businesses, are expected to drop by about 5 percent to 2.9 million units. It's the first time first-quarter retail sales are projected to fall short of 3 million units in six years, said Thomas King, senior vice president of J.D. Power's data and analytics division.

It's more evidence that vehicle sales in the world's second-largest auto market are sliding from the record levels they had achieved in the years following the financial crisis.

While sales volumes are softening, especially for cheaper cars, customers are still paying remarkably high prices for cars, King added. Prices are hitting monthly records while retail sales of vehicles that cost under $25,000 are expected to fall 12 percent in the quarter, more than double the overall decline.

The average price of a new vehicle is expected to hit $33,319, the highest ever for the first quarter. The average buyer is paying $1,000 more per purchase than in the first quarter of 2018.

The data suggest that more and more buyers are getting squeezed out of the new vehicle market and are likely turning to used cars as manufacturers pull back on cheaper vehicles, said LMC Automotive President of Global Forecasting Jeff Schuster.

“The challenge will be holding discipline as new vehicles launch and competitive pressure grows,” Schuster said. “The Fed's decision to hold interest rates will help stabilize the interest element of the rising cost of buying a new vehicle.”

Renault reportedly wants to merge with Nissan and buy Fiat Chrysler

Bill Pugliano | Getty Images
Fiat Chrysler Automobiles, Chrysler Group headquarters

Renault is reportedly looking to restart merger talks with Nissan within the next 12 months before making an audacious attempt to buy Fiat Chrysler.

The Italian-American multinational is a prime target for the French firm, according to the Financial Times who cited several people familiar with Renault's plans, and former Renault CEO Carlos Ghosn held talks with Fiat in recent years before his arrest in Japan on financial misconduct charges.

The FT also reported that Fiat Chrysler Chairman John Elkann is open to a potential partnership or merger in a bid to boost his firm. A combination of Renault, Nissan and Fiat Chrysler would be viewed as a viable rival to the current global auto leaders, Volkswagen Group and Toyota.

Ensuring permanence of auto alliance a priority, Renault CEO says
7:15 AM ET Tue, 5 March 2019 | 04:24

Renault, Nissan and Mitsubishi are not officially merged but all three carmakers operate a partnership under a complex arrangement of cross-party share ownership.

The arrangement was plunged into crisis in November last year when former Nissan chairman and Renault CEO Carlos Ghosn was arrested in Japan following allegations of financial misconduct, which he denies.

Shares in Renault have risen 2.5 percent during Wednesday's European trade, while Fiat Chrysler is up more than 3 percent.

Renault and Fiat Chrysler were not immediately available for comment when contacted by CNBC.

For more on this story, please click here.

As Lyft goes public, profitability is a long-term goal, not a near-term likelihood

Lyft beat Uber to the punch on Friday — the number-two ride hailing service in the U.S. was the first to go public, pricing shares ahead of the IPO at $72. The stock popped as much as 20% in the first minutes of trading, valuing the company at nearly $25 billion.

But Lyft is deeply in the red today, with a net loss of $911 million in 2018. During its road show, Lyft told investors that eventually, it expects to hit twenty-percent margins. The company just didn't say when.

A fierce competition

Uber, which is expected to go public next month, still commands greater market share than Lyft.

It offers rides on-demand in 65 countries and has a stake in Didi and Careem, which operate in Asia and the Middle East and North Africa, respectively.

Lyft is far behind Uber when it comes to coverage. In 2018, its geographic expansion focused on coverage in 95 percent of the U.S., and some new locations in Canada, filings ahead of its IPO disclosed.

Uber was also the first ride-hailing company to expand into services like food delivery and bike-sharing (via its acquisition of Jump in April 2018) which provide it with different revenue streams.

Lyft has been slower to diversify, although it has invested in other modes of transit as well. It bought Motivate in 2018, a bike-sharing company after Uber bought Jump, for example. It also offers scooters to riders looking for options beyond the car.

Lyft
Lyft has invested in other modes of transit including scooters and bike-sharing.

Uber is making plays in logistics with Uber Freight, short-hop air travel with Uber Air, and driverless taxis with its own autonomous vehicle division, Uber Advanced Technology Group.

Lyft is more focused, although it is starting book passengers into self-driving vehicles via a partnership with Aptiv. It hasn't talked about any plans for air taxis.

The race to profit

The next race will pit these ride-hailing players against each other in a quest for profitability, and the confidence of the public market investor.

D.A. Davidson senior vice president and research analyst Tom White says Lyft is doing well with some traditional sales and marketing efforts, and incentives that keep drivers and riders loyal to their platform.

Long term, he says, “There's the potential for autonomous vehicles and autonomous technology to basically reduce the amount of times Lyft has to pay a driver. And that could be a big, big lever for profitability.”

Uber's costly ambitions and lack of focus could challenge its path to profitability, he suggested. “One of the things we like about Lyft being a little smaller than Uber is the fact that they are more focused,” he said.

Lyft
Lyft says it has facilitated 35,000 rides in autonomous vehicles like this one

Head of research at Manhattan Venture Partners, Santosh Rao, told CNBC: “The macro market is good, IPO sentiment is good, so I think this is the right time to get out and they're doing the right thing.”

Others look at Amazon, which lost money for the first several years it operated as a public company, and Tesla, which has yet to record a profitable year, as examples of growth stocks that didn't always prioritize profits.

For those holding out to see an end to Lyft's losses before buying shares, one recent SIG report forecasts the company will become profitable…but it may take seven years.

WATCH:
Lyft begins trading on the Nasdaq at $87.24 a share

Watch the moment Lyft begins trading on the Nasdaq at $87.24 a share
1 Hour Ago | 02:20

Volkswagen chooses Amazon’s cloud service to help it build cars

Julian Stratenschulte | picture alliance | Getty Images

Volkswagen and Amazon Web Services (AWS) have teamed up to work on a cloud-based platform to transform the auto giant's “manufacturing and logistics processes.”

The multi-year, global agreement, announced on Wednesday, would see Volkswagen use a range of services from AWS, including machine learning, the internet of things and analytics.

Among other things, these technologies will be used to boost plant efficiency, increase the quality of vehicles, and improve production flexibility.
Real time data from 122 manufacturing plants will be collated to track parts and vehicles and “manage the overall effectiveness of assembly equipment,” AWS said. The platform will eventually integrate over 30,000 facilities and 1,500 suppliers in Volkswagen's supply chain.
“The Volkswagen Group, with its global expertise in automobile production, and AWS, with its technological know-how, complement each other extraordinarily well,” Oliver Blume, who is chairman of the executive board of Porsche AG and a member of the board of management of Volkswagen Aktiengesellschaft, said in a statement Wednesday.
“With our global industry platform we want to create a growing industrial ecosystem with transparency and efficiency bringing benefits to all concerned,” Blume added.

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Nissan executives allegedly orchestrated Carlos Ghosn’s arrest to kill merger with Renault

Takaaki Iwabu | Bloomberg | Getty Images
Carlos Ghosn, former chairman of Nissan Motor Co., center, sits in a vehicle as he leaves his lawyer's office in Tokyo, Japan, on Wednesday, March 6, 2019.

Nissan executives took steps to have former Chairman Carlos Ghosn jailed in the hopes the arrest would stall or kill any attempts to merge the Japanese automaker with its French counterpart Renault, reported the Wall Street Journal Thursday, citing unnamed people familiar with the matter.

Nissan CEO Hiroto Saikawa, who had in the past been close with Ghosn, said at a Jan. 31 meeting that he believed Nissan executives had gone digging for evidence and presented their findings to Japanese authorities with the purpose of removing Ghosn from power, the paper reported. Ghosn had reportedly been trying to merge the two automakers, who had formed an alliance in 1999.

Theories that Nissan executives might have had a role in Ghosn's arrest have abounded in the automotive world. Ghosn had become something of a national hero in Japan for his role in helping to turn around Nissan, but many who follow the industry say the Japanese would have balked at the idea of a foreign automaker such as Renault owning such an important company in Japan.

Ghosn spent more than 100 days in jail in Japan for an array of alleged financial misdeeds before he was released on bail. He has been stripped of his roles at the Renault-Nissan-Mitsubishi alliance, which he had formerly chaired. If found guilty he could face up to 15 years in prison. He has denied the accusations.

Nissan was not immediately available for comment to CNBC, but company spokesman Nicholas Maxfield told the Wall Street Journal the motives of company executives is not relevant, and that the company found “substantial evidence of blatantly unethical conduct. The sole cause of this chain of events is the misconduct led by Ghosn.”

Read the full story in the Wall Street Journal.

Fiat Chrysler shares climb on talk of a merger analysts think is ‘half-baked’

Uli Deck | picture alliance | Getty Images
A Jeep Renegade 4×4 e is presented at the Geneva Motor Show March 5, 2019. Signage in the background says”'FCA Fiat Chrysler Automobiles,” to which Jeep belongs.

Shares of Fiat Chrysler climbed just over 3 percent Wednesday on talk of a merger with French carmaker Renault, but analysts are skeptical a marriage between the two companies is likely.

The Financial Times reported Wednesday the automaker is a potential acquisition target by French carmaker Renault, after Renault sorts out its relationship with Nissan, the Japanese manufacturer with which Renault has had a longstanding but lately troubled alliance.

But a merger between Renault and Fiat Chrysler seems just a bit far-fetched, Bernstein analyst Max Warburton said in a research note Wednesday.

“We've been asked to give a view, so here goes: this idea is half-baked, politically almost impossible to deliver and even if achieved, the resulting company would be unmanageable,” Warburton said. “We hope it is a banker's fantasy rather than a serious proposal from the key decision makers.”

Renault and Nissan have lately had their relationship tested after Japanese authorities jailed the alliance's former leader Carlos Ghosn over allegations of financial misbehavior.

But before going after Fiat Chrysler, Renault wants to restart talks of a merger with Nissan, the Financial Times reported. That is something Ghosn had reportedly been working on himself a few years ago, long before he was ousted from his position over accusations of financial misbehavior. Ghosn has denied all the accusations against him.

Commerzbank analyst Demian Flowers said he thinks the ordeal will drag on.

“Therefore, it's far from clear that the alliance can sort their internal disagreements out in time to be in the running for FCA,” Flowers said of Fiat Chrysler. That at least one other automaker has expressed interest in acquiring Fiat Chrysler and that the company's controlling owners, the Agnelli family, seems interested in a deal suggests the automaker is a potential target, Flowers added. If the deal depends on Renault's merger with Nissan, it will be a lot tougher to pull off, he said.

Warburton had even stronger words of skepticism for the hope that Renault and Nissan can reconcile their differences.

The problems between Renault and Nissan do not stem directly from Ghosn himself, said Warburton, but from the wider French control at Japanese Nissan and Renault's “cadre of international 'citizen of nowhere' managers.”

“We live in an era of de-globalisation and heightened anxieties about national and regional identities,” he said. “This applies to corporations as well as politicians and individuals. Proposing a merger with Nissan would be like demanding the UK's Brexiteers turn 180 degrees and sign up to a European superstate, or inviting the Baltic States to rejoin the USSR. We just can't see it happening. We'd describe hopes of a functional Renault-Nissan merger as delusional.”

Automotive history is littered with examples of mergers that have not worked out, he added. The alliance between Renault and Nissan, which Japanese manufacturer Mitsubishi later joined, proved critics wrong and functioned largely because it was not a merger, but a loose alliance. Now even that has unraveled.

That said, Renault would probably be a better candidate for a merger with Fiat Chrysler if the alliance breaks up, which seems more likely than a Renault-Nissan merger anyway, Warburton said. Alternatively, a merger between Fiat Chrysler and French automaker Groupe PSA, could be a better fit.

“PSA may not bring electric tech or Asian exposure but it does come complete with a superstar CEO with a proven ability to lead, motivate and integrate,” he said of Groupe PSA CEO Carlos Tavares. Groupe PSA owns Peugeot, Citroen, Opel and other carmakers. “And in this industry, that's probably worth more than a few million units more 'scale,' an extra nameplate or the ability to build a battery.”