My forecast for the Giulia

Alfa_Romeo-Giulia-2016-1280-1cThe new Alfa Romeo Giulia is perhaps FCA’s most important bet after the introduction of the Fiat 500 in 2007 and the acquisition of Chrysler in 2009. After years of speculations and drama from the brand’s fans, this midsize sedan is finally available in Italy and soon in the rest of Europe. The 106 years old Alfa Romeo is supposed to be back in the field as the new Giulia is just the start of a range of new products that will hit the market in the next 4 years. After delaying by two years the brand’s sales target, Sergio Marchionne has repeatedly said that the Giulia is not at the same level of the German premiums but better. Despite the technical, performance and design issues, will this new Italian car find its place in the market?

Easier in America than in Europe

Thanks to the strong presence of FCA in North America, the Giulia is expected to hit this market as a local player. This means that it will make use of the big dealership network and at the same time it will be promoted with a big budget. Alfa Romeo’s image in the US is definitely much better than the one it has in Europe, and this is the main reason why it will be easier for the Giulia to gain clients there. Therefore the big challenge for the Alfa won’t be North America, but Europe, where I’m afraid it won’t be as easy as the big guys from FCA are thinking. At the end in USA, the Giulia will play as local against the foreigners from Audi and BMW.

Alfa Dealers

Alfa Romeo’s plan is to have 200 dealers in North America by the end of this year. That would be more than Audi’s quantity and fewer than BMW’s total. Source: Bloomberg, Audi News and BMW. 

In Europe the situation is quite different. Even if it plays as local in Italy, it won’t be easy to grab the attention and take sales away from its German rivals. First of all because Europe’s largest D-Premium markets are strongly dominated by Audi, BMW and Mercedes. In 2015, these three brands controlled 96% of German premium D-Segment registrations. UK, the second largest market for this kind of cars, their share was 88%, while in France the percentage was 75%. Italy at fourth place was also a good market for the Germans with 85% of this segment. Belgium outsold Spain as the fifth largest market for the D-Premiums, and there 82% of the registrations corresponded to the Audi A4/A5, BMW 3,4-Series or a Mercedes C-Class. These five markets counted for 73% of Europe’s total D-Premium registrations, which totaled 652.800 units, up by 7% over 2014 results.

Waiting for the SUV

There is also another issue that may play against the Giulia. Italy, where it is supposed to become its largest market in Europe, clearly prefers Station Wagon body types than the traditional sedan. The brand doesn’t plan to introduce the Giulia SW due to lack of interest of American, Chinese and most European consumers. But in Italy things are different and most of the midsize and large segments are dominated by the SW versions. This is also the case of Scandinavian countries and a somehow Germany. This is why I believe that even if it will become a key player in the Italian midsize premium segment, it won’t be able to outsell the Audi A4, which by the way is having an enormous success thanks to the new generation. Outside Italy, it will be a bit tougher as in Germany it will become a niche car, while Northern Europe will barely consider it. The sporty versions of the Giulia will have a better future in the UK and Switzerland, while in France and Spain it could find its way.

D segment premium

The premium D-Segment is definitely more balanced in USA with all makes having an important role. In Europe the three Germans control 86% of the segment, leaving very few market to the other alternatives. Source: FGW Data base, JATO Dynamics, Goodcarbadcar.net

The other trend playing against the new Alfa sedan is the segment itself where it will play in. Midsize premium sedans global sales grew by 12% last year and totaled around 1,92 million units. Even if it was a good growth it’s far from the +40% posted by the premium midsize SUVs, whose estimated global sales totaled 1,07 million units. This means that even if the Giulia is joining a bigger segment in terms of volume, it’s definitely more hostile to new comers or everything different from German. It is not the case of the D-SUV segment which doesn’t only grow faster but other brands such as Volvo, Lexus and Land Rover got their important piece of the market. That’s why the new D-SUV from Alfa Romeo (aka Stelvio) is at the end more important for the brand’s plans.

Premium d

The big growth in the premium D-Segment is coming from the D-SUV. Source: bestsellingcarsblog.com, FGW data base. 

 

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19 responses to “My forecast for the Giulia

  1. Very good analysis…
    It`s not going to be easy in Europe…
    let`s hope Stelvio will be as good…
    Meanwhile, Germany authorities (actually the german auto lobby) are trying to strike the Fiat 500x success… after doing almost aboslutely nothing to VW after the emitions scandal….

    • I agree, but I would add the following: the repositioning of an Italian car brand (Alfa Romeo, which was, in my opinion, not well managed), and in addition, the aggressive management of the car industry/ country image of the German system, as well as the thinly-veiled nationalism of the German market make it very difficult in Europe the revival of that brand.
      The decision to create a time gap between the past products and the new products, I think it was excellent (although sometimes causes puzzlement), as it serves/d to create the conditions to restart.
      Also the time schedule and the type of products has been well-planned enough, but I think that the “Giulia” model should be applied more to the brand and at group level.
      This model starts from the launch of a product (Quadrifoglio Verde) “sexy” and superior to the competition: probably the Quadrifoglio Verde will generate a loss (this also depends on the cost model employed), but the positioning of the Giulia, in the head of the consumers, thanks also to the “temporal rift”, is then positioned at a high level and this helps to promote the “normal” sales of the “normal” Giulia (good product), the very actual source of profit. It is indeed the marketing schema of successful German companies. FINALLY!!
      NB: the quality of the sales network, the quality of service and maintenance, the level of the insurance offer, and attention to the leasing company (whose sales networks are sometimes geared to art by certain producers of certain country systems …)

  2. This analysis is based on the current situation of the premium D-segment market where there haven’t been any viable alternatives to the german offerings for a few years in Europe.

    Yes they dominate that segment but lets look at the competition to the germans:
    1 – Lexus IS. Doesn’t have any diesel engines nor SW body type. Obviously sales will be marginal,
    2 – Volvo S60/V60. This model is aged and screaming to be replaced. It is a decent option but way behind the quality of the germans. Even so, it sells decently and mainly in SW body types.
    3 – Jaguar XE. Just arrived in the market. It’s leading to a big increase in Jaguar sales since it has a good diesel engine offering and is competitive with the germans even though it has some flaws.

    And the Giulia. It will have good diesel engine offerings. It won’t reach the success of the germans since it will never sell in insane numbers in Germany, the biggest european market, nor in other nordic countries. These countries disdain southern european products.

    In Italy, France, Spain, the UK the Giulia will have a bigger chance of making sales.

    In the US, the Giulia faces a lot more competition but the consumers are more open to non-german premium brands. just look at Lexus, Acura and Infiniti sales over there.

    The D-SUV will be more important to Alfa, just as it is to Jaguar. the germans don’t hold any superiority in SUVs/crossovers over their other premium rivals since Land Rover and Volvo managed to make superior products to the germans. The Stelvio and F-Pace will probably show up strong as well as the Levante in that regard.

    • Pedro, remember that many years ago the Germans copied Alfa’s cars and BMW learned from there how to bild a true sporty vehicle. I know this is history and the present is very different, trivial to say, but quite a lot of nordic people is fascinated by Italian products and know well this story. It is a minoritarian percentage out of the total population, of course, but usually they are rich, cultivated, they travel a lot, love arts and…. lot of money to spend. So if this product, I mean the Giulia, is as nice and successful as it seems on paper (or in the web), it can find a good deal of buyers also up there in the north, I believe.

      • Thank you Robert. I hope the same, the Giulia is a good car, but we can’t yet evaluate the predictions. It is too soon.

      • Giulia is alive and well in Germany……and increasing sales substantially as I predicted in July 2016.

    • good analysis……….Pedro …. in conjunction with manufacturing in Italy I would manufacture the Alfa brand also in in Germany and keep the northern European content.

  3. Giulia SW is coming before the end of 2017. It was confirmed by Wester during media launch at Balloco.

    Currently in the USA there is more than 140 Alfa Romeo dealers.

    • Are you sure about that, because up until now Alfa officials have been denying that the SW version of Giulia is in development. Furthermore Stelvio (SUV) is in a way a decent replacement for SW.

  4. I still think there would have been greater pressure on the Germans and Jaguar if this car had been a Maserati, as there would have been more scope for developing a more premium style. Jaguar have managed it really well with the XF, but not quite with the XE, in creating a true GT looking car in the different sizes.

    • If they’d launched a 4-cylinder Maserati of the D-segment they would be diluting too much the exclusivity of the brand and going against everything that it represents.

      As it is Maserati is more aligned as a Porsche competitor and Alfa as an Audi competitor.

      • Jaguar has done it and they are an exclusive brand and many years ago it would have been sacrilege for Mercedes to do a 4-cylinder, but they took the plunge and look at the brand now.

        People buy into a brand and what it represents now and not what engine it has underneath.

      • Nevertheless, Mercedes has always been in more market segments than Maserati or Jaguar. They even do comercial vans.

        Jaguar was always a luxury brand and had bigger scale than Maserati. Maserati was always a smal scale manufacturer in the vein of McLaren, Ferrari, Lamborghini. Before the Ghibli they produced 3000 cars per year. Now they produce 30.000.
        Jaguar already produced tens of thousands of cars per year since at least a decade ago.

        It makes no sense to grab the Maserati brand and have them make midsize sedans with 4 cylinders because people would buy them in the expectation of having something similar to a supercar and would get an ordinary car. Then they would be resentful because people would buy into what Maserati represents and see that the car they bought didn’t stand for what Maserati represents… Not to mention the scale up in the dealer network necessary to make that work.

        Also Alfa, already sells tens of thousands of cars per year (and it used to sell even more), it has a bigger dealer network and still has the brand appeal to be positioned as a premium offering.

  5. I understand all those comments, but I still think that Alfa would be better focus sing on a sports car range, that mirrors Ferrari but smaller. Maserati would not lose out in producing a junior exec competitor for C class.
    In Europe, Chrysler would take on the role of mid range competitor, aiming for quality at a fair price, (Think Hyundai), with Fiat having the small car range of chic, (500) and practical (Panda). The new Tipo should be a Chrysler and target i30, Focus, Astra and Golf.
    With these changes there would be room for a Lancia revival as a super luxury range, think Bentley or Rolls Royce. Dodge could be used as an American muscle brand.

  6. Are we not forgetting that for most of 20th century Fiat was the biggest car manufacturer in Europe, and third in the world behind GM and Ford. If Fiat had had united government support (Japan Inc.) or heavy middle eastern investors (Germany Inc) they would have become number one in the world by now [if you know Italian cars, you know they had the engineering, by far]- But the mani politi nonsense, & firing the genius Vittorio Ghidella- was like the Agnelli’s did not want, or were told not to fight the Germans too hard. Well we live in a new world, Marchionne is positioning Fiat, to become a powerhouse in the future. Alfa will get their market share back, one way or the other

  7. Pingback: My forecast for the Giulia | Rocking press·

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