What happened to Fiat in Sao Paulo?

Tomorrow Latin America’s most important car show event takes place. The Salao Internacional do Automovel de Sao Paulo 2012 will take place till November 4th gathering the latest proposals from several car makers already installed in Brazil or thinking to start business over there. As New Delhi motor show, Sao Paulo one is becoming as important as other international auto shows as Brazil is now the fourth largest car market in the world. The good current situation is just the beginning of what most analysts consider will be one of the fastest growing car markets. Though there are still many problems to be solved (in terms of energy costs for assembly plants, or lack of local components for the production of cars), Brazil is still young when talking about its population. The last governments have made a lot to reduce poverty and therefore more and more people begin to become a part of that big middle class that is buying goods. However a big part of the population does not have a car yet, and it means thousands of future clients will come to dealerships in the coming years. Therefore competition is getting really hard as more and more car makers from all over the world decide to come to Brazil with the construction of plants as local production is very welcome while imports have so many taxes and difficulties.

It is how Sao Paulo motor show will open its doors from tomorrow but as usual, most of the cars to be presented were already shown to press. Fiat is Brazil’s largest car maker and seller but is also the only major company not to introduce any new model or present a concept car during this important event. Brazil represents 34% of Fiat Group total sales and 17% of Fiat-Chrysler Group sales. It is certainly a big market for the group and is perhaps what saved Fiat from bankruptcy in the past. It is well-known that Fiat Brazilian factories produce much more than Italian ones, and the position of the brand in this South American country is much stronger than the weak way Fiat manages its business unit in Italy. Thanks to good products that enjoy of a great mix of standard quality, low-cost and interesting design, Fiat offers a big range of products that goes from the successful Uno (Brazilian version of the Panda) up to the mid-sized sedan Linea. It is that big in Brazil that only in August Fiat sold more than 100.000 cars over there, much more than 34.000 units Fiat brand, Alfa Romeo and Lancia sold all together in their native Italy in the same month. Fiat is very well-known and really appreciated by Brazilians. In other words, Brazil is the most important market for the present and future of Fiat brand.

After considering the size of the market and its importance for Fiat, it is then inconceivable the lack of any important launch in Sao Paulo motor show. After Paris, where Fiat was the only major European car maker not to introduce any important model, Sao Paulo was the next important meeting for global car industry, and it is supposed to be Fiat’s home. Marchionne’s decision of delaying investments in Europe can explain the lack of new cars in Paris, well all new cars from every brand (the new Panda included) are suffering the consequences of weak demand. It could had been the best scenario to present the new Fiat 500 Cross over version, or the new generation Punto, but things are not going well in Europe, and Fiat prefers to wait. But the situation in Brazil is completely different. As it was said before Fiat Brazil completes a new record in car registrations, and they are now building a new factory that will be able to build from 200.000 to 250.000 cars per year. It all means that things are good and will continue like that at least for the coming years. It is why going to Sao Paulo motor show without any new car is pretty much insane and at the same time a great opportunity for competitors such as VW, Chevrolet and Hyundai to occupy the top of mind when reading anything related to this important event. While VW showed a concept small SUV, or GM revealed the new ‘B-Segment’ Onix, Fiat, Brazil’s best-selling car manufacturer, showed special editions of the already known Siena and Linea, or ‘sporty’ versions of the Uno and Palio. As a concept they showed a revised stylish Bravo with a different grill. How could that happened? Sao Paulo motor show was the best scenario for the presentation of the expected Crossover based on the Fiat 500L, as it is the origin of ‘B-SUV’ segment. This kind of cars is becoming really popular in emerging markets and that’s why Ford created the segment with the introduction of the EcoSport (now in its second generation), followed by Renault with its Duster, GM with its Mokka/Trax and now VW with the concept Taigun.

It is clear that Fiat does a great job in Brazil and offers a wide range of products. But things like the ones of Sao Paulo motor show can’t happen anymore if they want to keep their place and ensure a better future. But it is not enough. Fiat must think of other markets in Latin America, as Brazil is becoming another Italy in terms of sales dependence. Yes, it is by far the largest market in the region but there are other interesting markets to be considered. It means not to repeat Italian story about concentrating most of its efforts and sales in just one single market when outside there are plenty of opportunities. In other words, besides Brazil and Argentina, there are growing markets such as Colombia, Chile, Peru and Ecuador where Fiat could have a better role. Yes, most of Latin American economies do not make part of a unique economic bloc as it happens in Europe, but Brazil will reach a top in the next 10 years and then the market will stop growing for Fiat. In that case having good business in other countries will be a useful thing. Africa is another good example of what Fiat Brazil could do. Brazil has strong commercial relations with a big part of Southern Africa. Some countries over there speak portuguese also and the transport time between them is not long. Brazil needs first to satisfy its own needs in terms of car demand and then think of exports. But Fiat must do twice to avoid what happened to Italian factories and a big part of European demand in only one country. Besides, Fiat should think more of the future Brazilian society. Now, middle class rules in car demand, but as a growing market, Brazil will soon have an important and powerful high class ready to buy luxury cars. BMW just signed an agreement with Brazilian government to build a new factory to produce its own cars. Nissan wants to become Brazil’s top Asian manufacturer with its regular cars and the introduction of its premium Infiniti. Fiat should be thinking of producing in Pernambuco (where the new factory will be ready by 2014) some compact models of Alfa Romeo and make use of its position to introduce larger and more luxury cars. To many things to do in an important market.