RENAULT SA Chief Executive Officer Carlos Ghosn said he expects mergers among auto makers because car companies' stocks are "undervalued."

"When you've got General Motors Inc, the world's biggest car maker, worth US$6 billion, or 3 percent of its revenue, that is about two weeks of revenue, you know very well that something is going to happen," Ghosn said during the Economic Forum of Aix-en-Provence in southern France over the weekend.

In Europe, the Dow Jones Auto & Parts Index is trading at 8.3 times earnings, less than half the level four years ago, Bloomberg News reported. The Dow Jones Utilities Index, including companies such as E.ON AG and Centrica Plc, trades at a multiple of 13 and has held above 10 times earnings since 2004.

Auto makers from Renault, France's second-largest, to GM face pressure on profit margins as an increase in steel costs reduces profitability and record crude oil prices damp consumer demand.

Renault shares have slumped 55 percent from their peak last year, valuing the company at 14.9 billion euros (US$23 billion).

Renault's revenue is about 2.7 times its market value.

The company, based in Boulogne-Billancourt, expects steel costs to rise 1 billion euros next year and plans to pass on some of that increase to consumers, Ghosn said. Costs for the metal will rise as much within the next year as they did between 2006 and 2008, he said.

"So far consumers haven't seen much of it," he said. "They will see more of it gradually."

Steel prices remaining at current levels would cause costs to rise 200 euros per car, on top of a 100-euro increase last year, Citigroup Inc analyst John Lawson said, according to Bloomberg News.