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Jefferies: Rumored Chinese bid for Fiat Chrysler 'just what the sector needs'

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Jefferies research increased its price target on Fiat Chrysler after speculation that a Chinese automaker may bid on the company.

In response, Jefferies equity analyst Philippe Houchois called the bid "just what the sector needs," citing previous examples of successful Chinese auto takeovers.

"Whether any deal goes through, we believe industry consolidation is a positive for auto investors," wrote Houchois in the Tuesday note.

Shares of Fiat Chrysler soared over 7 percent on Monday after news of a bid first appeared in Automotive News, a weekly automobile newspaper. The stock rose an additional 2.5 percent Tuesday morning.

Fiat Chrysler declined CNBC's request for comment and has not confirmed the original report.