Volkswagen to buy Fiat? just a rumor looking to benefit some stock market investors. It happened also when Audi was supposed to buy Alfa Romeo. There is an immediate positive effect on Fiat’s share value. It makes no sense to think of selling the whole company when the merge between Fiat and Chrysler isn’t ready yet and Marchionne plans are at the early stage. However the Germans may be looking for something they need and FCA has. Yes, is hard to think that the next world’s largest automaker lack of something. But Fiat and Chrysler together count on certain strengths that VW with its 12 brands doesn’t have. VW wants to become the biggest car maker (by volume) by 2018 but it seems that it will make it by the end of this year. Nevertheless, it won’t be able to handle the pole position for long if it doesn’t improve certain aspects that are crucial to keep the leadership. FCA is located 6 positions behind and sells less than half VW global registrations but counts on some key strengths that can certainly help VW.
SUV, trucks and MPVs
VW lacks of real SUVs, Jeep has them. When talking about what American drivers love the most, Fiat Chrysler is much better positioned with its wide range of SUVs, MPVs and big trucks. USA is the world’s second largest car market and the biggest for SUV and MPV segments. FCA controlled 11,8% of SUV segment (12,5% in 2012) with a better position in D-SUV, 17,5%, and E-SUV 13,5%. VW, Audi and Porsche with their SUVs controlled only 2,4% of all SUV segment (in 2012 its share was 2,3%). It’s quite normal that FCA as local owns a larger part of the market. But having 2,4% market share in the most important segment of the world’s second largest car market is something to worry about. Simply: FCA has the right products for the right market, and VW lacks of those right SUVs. In terms of trucks VW doesn’t even propose a pickup, even if it is the third most important single segment, after the D and C segments. The big difference is also evident in MPV segment: FCA leads with 33,8% market share (ahead of GM and Ford) while VW had to stop selling the Routan (based on the Chrysler Town & Country) as it was a complete flop: 2109 units sold in 2013, 0,2% of MPV segment.
Fiat brand along with Suzuki may be the world’s leading city-car makers. Fiat is known for building small, efficient and charming cars. It is not the case of VW. Excluding the Beetle, the group (VW brand, Skoda and Seat) hasn’t been able to propose a real city-car for the masses. It failed with the Lupo/Arosa, and the Fox (in Europe). The Up! found some popularity in Northern Europe but it is quite unpopular in France, Italy and a complete flop in Spain. Its twins Mii and Citigo perform even worse. They were all created in 2011, the same year the current Fiat Panda was launched, and 4 years after the Fiat 500 debut. This means that the trio from VW is as old as the Panda and 4 years younger than the 500, but it hasn’t been able to outsell them no matter the fact that the Up’s registrations are strongly supported by the German market, Europe’s largest. In Brazil the Fiat Uno has ruled without a clear VW rival, but things are changing with the arrival of the Up!, which seems to become a real threat to the popular Fiat. Meanwhile the Italian brand gets ready for an update to be presented in Sao Paulo motor show.
Fiat is also stronger making small MPVs and SUVs. Since its launch, the 500L has led B-MPV European segment by far thanks to its popularity not only in Italy, but in Spain, France, the UK and others. It seems that the ‘500 formula’ worked in other segments while VW and all its brands are out of this segment. The gap between Fiat and VW can be seen in B-SUV segment as well. Even if Fiat arrives late, as the segment exists since many years, the Jeep Renegade and Fiat 500X are supposed to become the segment’s referents in terms of performance (Renegade) and design (500X). Fiat expects a lot from them. VW is still working on the Taigun but it isn’t clear when it will be available.
American car market hasn’t stopped to grow since financial crisis of 2009. Last year sales jumped 7,5% but VW Group registrations fell 0,6% losing market share. FCA (Ferrari and Maserati included) was able to increase its sales by 9,1% reaching its best market share since 2007. The gap between them has increased since 2011 and in 2014 FCA’s share is 8,94 bigger than VW Group’s, the same distance that there was in 2008 (8,63 by that time). In the first 8 months of this year FCA market share jumped from 11,60% in 2013-Full Year to 12,47%. VW’s quota dropped from 3,92% to 3,52%. FCA counts on Jeep and Ram as its growth drivers as Americans are demanding more and more SUVs and trucks, while VW’s offer is limited to European designed products. Actually the Germans have noticed that the Touareg, Tiguan and Q7 aren’t the right SUV for American consumers, and that’s why they will start the local production of the VW 7-Seater SUV by early 2016. The offer isn’t the only advantage of FCA. Its dealer network is also much wider and effective. Chrysler cars awareness is much higher than VW’s or Audi’s, while there is a better positioning of the FCA brands than VW’s: Americans know that Dodge cars are muscle American products, Ram is the brand of big trucks, Jeep is SUV, and Fiat is the brand for small and cool cars. VW brand struggles to be identified as a prestigious option and it couldn’t transmit the idea of German excellence, just as it works perfectly in Europe. The Volkswagens are known as low quality and sometimes ugly regular cars. Of course it is not the case for Audi and Porsche.
Even if the marriage of Fiat and Chrysler was officialized some months ago, its brands seem to be much more aligned and united than VW’s. First, the Italians went to America to transfer their technology, but the collaboration was extended in the opposite way as well. That’s how we see the new Jeep Renegade/Fiat 500X, based on the Fiat 500L platform. The new Jeep Cherokee uses the Alfa Romeo Giulietta’s platform. The Fiat Freemont is the Dodge Journey. The future Maserati Levante will use the Jeep Grand Cherokee base. Even if it was an acquisition, it is more likely to be considered a merge as both companies help each other and make part of the same strategy (contrary to what happened when Daimler bought Chrysler). In the case of VW AG, the situation is the opposite. Yes, they are very efficient in everything related to the shared platforms (even though VW production chief left in August by ‘mutual agreement’ following some problems regarding the Golf production delays related to the MQB platform). But the big VW and its 12 brands face problems regarding politics inside the brands. In one side there are Audi and Lamborghini which disagree with Porsche and Bentley about the development of the future models based on common platforms. Their animosity is that big that they are both developing different platforms for their upper segment models, burning $4.000 million dollars*. The problems among VW brands are also related to the strong influence of Mr. Ferdinand Piech, the group’s Chairman, who has become like the new Alexander the Great of its automotive empire. Many analysts fear that after his death, he is 77, the different factions of the group will start a hard battle to impose their position (see: “VW’s struggles in key markets threaten momentum as post-Piech era looms“).
One of Fiat 500’s key success is its customization program. It is quite difficult to find two same 500s in the streets. Consumers love this thing and that’s why the company wants to enlarge the success by offering more and more personalization features for all the range. That’s the main purpose of Mopar brand. From the small Panda up to the big Ram (excluding Maserati and Ferrari), all models can be personalized with different accessories and parts, something that VW group doesn’t have that well conceived. Germans are more boring in this aspect. Following with this topic, I found that there is a special site to go even further in terms of modifying the vehicles. It is called CARiD and it features several options for parts and accessories for Alfa Romeo, Chrysler, Dodge, Ferrari, Fiat, Jeep, Maserati or any other car. CARiD features interior and exterior accessories, performance parts, automotive lightning, wheels and tires, audio and electronics, auto repair parts, auto body parts and tools. The site is pretty cool and easy to navigate.
* According to Automobile magazine
There is already an interesting, especially from an Indian vantage point, connection between the fates of VW and FCA: VW’s under-arbitration 19.5% stake in Suzuki, the near 50% market share leader by far in India.
It is said that Marchionne is VERY interested in replacing VW as (equity?) partner to Suzuki, provided of course Suzuki wins the arbitration case. Old old man Suzuki is an ancient CEO with no viable option for business heir. The arbitration proceedings end soon, it has been reported. ChryslerFiat will be keenly awaiting the verdict!?
Note that both Fiat and VW-cum-Skoda are very puny and weak players in the Indian marketplace, as yet. This VW stake in Maruti Suzuki India (via Suzuki) is vital, then, to both companies’ ability to profit from the sustainable boom in Indian car sales. They will both struggle for years to do that on their own.
Note also that Suzuki and Fiat are old partners in Europe (SX4/Sedici, and Fiat diesel engines in Suzuki-s) and in India (diesel engines and now supplies of the M Marelli AMT gearboxes.)
Fiat and Suzuki fit each other excellently. Let’s hope the whole VW arbitration thing results in big moves by Fiat and Suzuki to tie-up.
ChryslerFiat would gain huge access to the Indian market as profit source, and Suzuki, famous only for small, economical mass market cars, would get cost-savings, diesel engine and SUV technology, and possibly a share in FCA’s fantastic American and premium brands.
That’s right: Suzuki would be the perfect partner for FCA in Asia. We will see.
Prabhjot, that was a good insight view.Thanks for bringing this out.
Is vw really buying Fca ?? Please answer
Anass ,VW is not buying FCA and will never in the future as well.
NOOOO Sergio HATES VW and will never sell to VW.I love Alfas,but NEVER would I buy a vw from vw,much les an Alfa.
First of all congratulations for your great blog is really impressive. Well, I think that Germans could be interested on Chrysler´s SUVs indeed, but I find hard to believe that they will consider to ally with Fiat and collaborate with the Agnelli family, even taking into account that the new Fiat 500 could be as successful as Mini for BMW´s.
Summing up : Cultural problems between Germans and Italians, Alfa and Lancia lethal crisis, Daimler and his failure with Chrysler, plus brands portfolio duplicities (Lambo-Ferrari, Bentley-Maserati ) make me think that Germans won´t dare to merge with FCA. VW group just buy what they want.
Yes, there would be a lot of problems with a possible merge. VW can do it by itself. Chrysler SUV and trucks division plus Fiat small cars would certainly help the Germans to increase its gap with Toyota. Keep reading!
This is actually pretty interesting. Fiat is becoming an american brand now.
Very good job ,but as far as the last news are Maserati Levante won’t be based on Jeep Grand Cherokee
Very good job ,but as far as the last news are Maserati Levante won’t be based on Jeep Grand Cherokee
Juan, Another deep analysed article from you.Kudos to your hard work.I wish FCA’s future plans do shine asap mainly from Maserati ,Alfa & the product lineups for India.Fiat fans have been starving for upgrades from current Punto & Linea and seems like it would take another year :(.Our Autocar magazine reveals that there would be a downsized 1.5 mjd from the current 1.6 and rumours have been going all around.Anything you can share about the future products for us ? Your views ?
Autocar Information can be found here:
New Range of Products from Fiat to India:
All what I know is what the brand presented during the Investor day in May 2014.
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I hope that there is a partnership between FCA and Suzuki and that they flourish and give vw audi group a tough time.
I think FCA with Ferrari,Maserati,Alfa Romeo,Dodge,Lancia,Chrysler,Jeep,Fiat and SRT has the best combination of any car company on the planet,and can continue to build on their success,and does not need vw ever,and I will continue to support them.I actually hate vw.