The Mexican Fiat 500 grabs Latinamerica

Mexican Fiat 500 in Brazil starting at R$39.900 (US$19.700). Photo by carplace.virgula.uol.com.br

When Sergio Marchionne chose Chrysler factory in Toluca, Mexico, to produce the small 500 for the return of the brand to American market, he was not only thinking of labor costs. Certainly Mexico is a good place to produce small cars due to less expensive labor costs that allows car makers to have more profits per car produced (normally small cars have less profit). With less production costs then it would be easier to positionate the Cinquecento in the complicated American market, as the small Italian with interesting prices. Mexico is part of NAFTA, North America’s Free Trade Agreement, with the US and Canada, and therefore all products produced within these 3 countries can be exported to their partners without paying import taxes. But besides America and Canada, Marchionne’s mind was also heading to the south. Latinamerican market has become in one of world’s most dynamic, as it has not been affected by financial crisis of last 3 years, and sales continue to grow due to good economic moment and excellent perspectives for the coming years. Brazil, Argentina, Colombia, Chile and Peru are some good examples of amazing growth of car sales. In 2011 the whole region sold 6.466.328 units (included Mexico, Central America and the Caribbean), up 7% compared to 2010, which means that 12.3 new cars were sold per 1000 inhabitants, still far from developed countries (USA, 40.7 and EU, 36.2). Nevertheless all car makers are investing in the region for coming years as a big part of the population will buy its first car.

Fiat 500 production in Toluca, Mexico, from where it is exported to USA, Canada, Brazil, Argentina, Colombia and Chile, and soon China. Starting at MXN$199.900 (US$14.000)

Fiat-Chrysler has an important presence in this region. They have factories in Brazil, Argentina, Venezuela and Mexico and they sell everywhere. And Mexico has become an interesting production pole because of its economic agreements with other Latinamerican countries. It is while Chile and Peru the country with more free trade agreements signed. But unlike Chile and Peru, Mexico is a big car producer. In the region it has free trade agreements with MERCOSUR (Brazil, Argentina, Uruguay and Paraguay), Colombia and Chile, and it means they can export their cars paying zero taxes. It allows Fiat-Chrysler to export its Mexican cars to those countries with very competitive prices. One of the latest cars to make useful of this advantage is the Fiat 500. Marchionne was also thinking of this great opportunity because Mexico is the only country that can sell everywhere in the Americas with vert high quality standards and very competitive prices. That is why the Cinquecento is now grabing Brazil, Argentina and Colombia after the bad results that had the European version sold with vert high prices. Now Brazilians can buy it stating at US$19.700, while the car is available in Argentina starting at US$17.600, and US$20.000 in Colombia. In all markets is available with 1.4 8v 85hp or 1.4 16v 105hp. This good price can be seen in total sales. In the first 4 months of 2012, 6.764 units have been delivered to Brazil and 1.135 to Argentina. Eventhough are not big numbers as they are in Italy or in the US, the results of the small Fiat must be analyzed carefully from other point of view.

First of all, Latinamerican market is mostly composed of small and economic cars. The 500 is small but has never been a cheap car, not even in Europe. In Latinamerica this car is positionated as the cheaper competitor of Mini Cooper. It means it is sold as a mini exclusive car. This kind of clients are not really abundant. Secondly, Fiat’s image outside MERCOSUR countries is really bad. That is why selling a Fiat in Colombia, Chile or Peru can become a hard task to accomplish (in 2011 Fiat-Chrysler’s market share was 3.8% in Chile and 1% in Colombia, most of it thanks to Dodge models). And finally, the results obtained by the Mexican model must be compared to the Polish one. One year ago, the European version was not even in the top 100 best selling cars in Brazil, Argentina or Colombia. Year to date results show that Fiat 500 occupies place number 35 among best selling cars in Brazil (# 103 in 2011), and number 56 in Argetina (# 122 in 2011). In Colombia there is no official data but it has been known that the small Cinquino has been a success thanks to its low prices. Though there is not data for sales by model, the arrival of Cinquecento in Mexico has allowed Fiat brand to increase its sales up 112% in Jan-Apr/12. It all means that slowly the Fiat 500 is grabbing Latinamerican buyers as it has done in the other markets where it has been introduced.