You may have read in the SMH that the local BMW manager feels that they are losing ground to Audi. The reason given stacks up, in that Audi bases its cars on VW components and buying power and so can offer a luxury car at a better price.
PSA as a volume producer could offer the same scale advantages to BMW and that is in fact moving forward as they are increasingly sharing engines and EV technology. VW have the advantage that they own Audi and other brands and so can take a strategic global view of brand positioning. Not so easy for PSA or BMW, whose major shareholders are unwilling to cede control.

Renault and M-B have gone down this path as well, with a small share swap to help ally their interests. All the potential for the culture clashes that clobbered the M-B Chrysler relationship is there.
Overriding the whole industry is the basic economics that when you match unit costs to market expectation of price, big cars are much more profitable than small cars. The Germans are currently the world's most profitable car makers while losing market share to volume small car producers whose ROI unexciting.