The lack of competition and disgrace of Alfa and Lancia

To describe Alfa/Lancia situation and think of their future is a difficult thing to do, besides becoming a bit boring as is a frequent topic among car specialists. However, the fact that both brands are perhaps facing their worst crisis ever, is a good reason to go deep and find the origins of this bad situation and maybe find a solution. One of the main characteristics of capitalism is competition. In an open market the usual thing is to find several offers competing to get customer’s attention and purchase. It has worked for centuries and has become the rule for modern world. Competition is getting hard as globalization allows companies from every corner in the planet to sell their goods or services globally. It works like this for every sector and, though it may be considered unwanted sometimes, is really important for the health of a company.

Before they were absorbed by Fiat, Alfa Romeo and Lancia had the worst of the wars between them. With a lot of differences, their goal used to beat each others’ in order to get more sales piece of Italian premium segment. Their rivalry was even seen in races while they were always launching new models, most of them extremely popular and still remembered today. The fact that they were always trying to beat each others’ allowed them to survive to several crisis and at the same time become more and more competitive with interesting offers. That is why successful models like the Alfa Giulia, Duetto, or the first generation of Giulietta, or the Lancia Fulvia, Stratos or first generation of Delta were all conceived. They used to work really hard to win the match. Great products, the best quality and awesome designs were the result of this fight. And it was certainly a good thing for them as they were growing up always innovating and becoming better. That’s how competition works: if one wants to survive one needs to work hard, otherwise you are out.

Lancia became part of Fiat in 1969 after the acquisition of Ferrari and Autobianchi. Then in 1987 was the turn for Alfa Romeo. Both brands are now part of Fiat Group and are dealing with a lot of problems to survive. So after decades of hard competition Lancia and Alfa Romeo stopped looking each other as eternal enemies and became brothers of Europe’s largest car maker by that time. Certainly the move by Fiat allowed both brands to survive, but at the same time it created their worst problem: the lack of competition. Without any direct competitor their work became easier in the sense that they did not have to worry so much about what the other one would be doing. Now they were part of the same company and they could share projects and save money. In one hand this allowed Fiat to concentrate its power in Italy with several brands, but in the other one the lack of competition made of these 2 brands to become ‘lazy’. No competition, no worries. No worries, no development. And no development (or at least slowly development) is the main cause of the problem they have now. One would think that there is in fact competition, and a real tough one: BMW, Mercedes and Audi are very strong nowadays. And yes, they are now the rulers of premium segment even in Italy as Alfa and Lancia are not competitive and lack of real premium products. But by the years they were absorbed by Fiat, European markets were not as opened as they are now. There were more restrictions to imports and at the same time more government help to Fiat Group. In this context, they did not really have to worry about premium segment as they had the whole market for them.

The same situation would apply to Fiat brand but with less bad consequences as it has opened its market outside Europe. Nevertheless, Fiat became Italy’s unique car maker without any direct competitor after buying all its Italian competitors. In the 80’s Fiat used to be Europe’s largest car manufacturer thanks to its successful models like the Uno and first generation of Panda, which were not only popular in Italy but everywhere in Europe. Even VW used to take Fiat as a referent of the market to develop its products. Actually the first generation of VW Golf was conceived taking as a reference the Fiat 128. But then without any direct competitors in its native Italy, Fiat had nothing to fear and began to be less strict in quality while its competitors from the north were working harder. At the end it is known the result. The lack of competition had a very bad impact on Fiat’s development. Something that did not happen in Germany, France or even Sweden. In the first country VW had to deal with Ford and Opel, Audi did the same with Mercedes and BMW, while in France Renault was always working to beat Peugeot-Citroen. In Sweden Volvo was working more and more to fight properly with the extinct Saab. Meanwhile those brands who ruled alone in their countries were absorbed by others: Skoda and Seat by VW.

But inside Fiat Group there is also the opposite case that confirms that the lack of competition is harmful. Ferrari is perhaps Fiat’s most successful brand in terms of recognition and good awareness. Its success can be seen not only in F1 championships but in sales that grow every year. Those good numbers have been the result of hard work always trying to beat its eternal rival, Lamborghini that became part of VW empire some years ago. Both companies continue to compete without contemplation and that is why they offer the best of the best. It all proves that competition is good and necessary, and car makers must be careful about going forward to keep their place and always offer the best. Alfa Romeo and Lancia did not do it like that and now they suffer the consequences, but is time to think of the future and possibilities for them to survive and find a place in the market. Personally I think Alfa Romeo has more potential as it can become the perfect brand for pure Italian fashion mid size sedans and sporty cars just one step before the German premiums. People love Italian style and it’s recognized everywhere, so why not make useful of this and positionate Alfa as the stylish brand of the group? with Lancia is more difficult. It has lost its past of sportiness and has not been able to be known as a real premium brand though the big effort made by Fiat. People just don’t know about it or don’t believe in their luxury ‘wanna be’. For me Fiat must accelerate the integration with Chrysler and become of Lancia the italian chic brand for family cars with some touch of elegance and luxury. Now that both brands work together, they should focus on their future.