Fiat brand is the main obstacle for an eventual sale of FCA

Italy Fiat Chrysler Diesel EmissionsThe continuous rumors of an eventual sale of FCA group to another car maker are missing one important thing. It is clear that before stepping down, Marchionne wants to leave solid finances attractive enough to be acquired by another big player. The last quarter results confirm this attempt of improving the profitability and cash generation. However, the financial statements for Q3-17 show also an alarming situation among the brands of the group.

Fiat 1FCA’s current profitability is mostly coming from its SUVs and trucks. As the company is still waiting to reach the breakeven point for its brands Maserati and Alfa Romeo, the only real profitability source is coming from Jeep and Ram. Ferrari is no longer part of the equation, and the rest of brands post sales drops as a consequence of a lineup which is not aligned to consumers’ needs.

Fiat 2The main problem here is that Fiat brand, which counts for around 35% of FCA global sales, is not adding value but is possibly destroying it. It is not a global brand, and it has several brand image issues that affect its commercial performance in most of the countries where it operates. Fiat is not a brand recognized for its quality or for its cool cars. Europeans barely choose it when buying a new car, and excluding the iconic Fiat 500, you don’t see any other Fiats in the roads of Europe.

Fiat 4In Italy the situation of Fiat is far from the glorious and artificial years when they controlled a big part of the market. It is no longer the referent and during the last years it has lost the dominant position in four of the six largest regional markets of the country. Despite the historical link between the brand and Italy, many Italians don’t think of Fiat when it is about technology, quality or reliability. According to my latest research, Fiat brand currently produces 4 models in Italy. Ten years ago, the brand produced 7 different models there, and 20 years ago there were 10 Fiats made-in-Italy.

Fiat 5Brazil is the other part of the story. In contrast to the bad quality reputation in Europe, Fiat is a reliable brand there. And not only that, it is cool and is still a good car to own. Nevertheless, Fiat is also becoming less popular among Brazilian drivers, following the shift from traditional segments to SUVs. FCA has decided to position Jeep as the brand of SUVs, leaving Fiat with the usual small hatchbacks. This means fewer potential for Fiat brand, with its market share posting the lowest result since 2002.

Fiat 6In terms of range, Fiat is not only old, with an average age of 8 years, but it is not aligned to global trends. There is only one SUV from the 24 different models currently available, while other European mainstream brands like Renault, Peugeot, Volkswagen, or Skoda offer more than 3. Even Seat has more SUVs in its range than Fiat. While the brand focuses its limited resources on the launch of sedans and small cars (like the Tipo, Argo or Cronos), it should allocate most of the investment on growing segments like B-SUV and C-SUVs.

Fiat 3Based on these facts, what’s the future of Fiat brand? it is not clear what the plan is for the coming years. We don’t see any new big launches in the short term, and it is likely to continue seeing the brand depending on small cars and vans. The management must take a decision on whether investing more on Fiat brand or not. Meanwhile an eventual sale will be severely punished by the presence of what used to be Italy’s economic engine.

What to do?

I think Fiat has one last chance to become a real player. The idea of splitting the brand into two sub brands is in my opinion the best way of giving it a chance. Fiat has struggled for years in an attempt to change the public perception that it is a cheap and ordinary brand. They haven’t been able to achieve that. Instead of continue trying to positionate Fiat as a Volkswagen rival, the management should reconsider the idea of having the functional and aspirational sides of the brand. It was a good idea, but unfortunately it was one of the many beautiful PowerPoint presentations that didn’t become reality.

Fiat 7Fiat should attack the market from below and from above. If it is considered a cheap brand, then the company should not fight this, but it should make use of it. Renault earns money thanks mostly to Dacia, a brand that very few people knew only 10 years ago. And of the reasons for Dacia success is that it lacks of direct competitors. Why not having the functional Fiat family as the rival of Dacia with the next generation Panda becoming cheaper, a cheap new subcompact (Sandero rival), and the Tipo? they could be also joined by a rational A-SUV (based on the Panda but using a different name), a cheap B-SUV and even a cheap C-SUV?

Fiat 8At the same time, the brand could also focus on the top side of each segment with the aspirational family based on the Fiat 500. If Mini could do it by adding the 5-door version of the traditional Mini Hatch, why Fiat doesn’t try with a bigger and 5-door 500 for the B-Segment? what about having a fancy and stylish compact car to sit above the Tipo? and the most important: a more refined 500X, a semi-premium C-SUV and a even a bigger and stylish D-SUV? Meanwhile Brazil must focus on launching cheap SUVs (from A to D) for the developing markets (South America, Mexico, India, South East Asia, Magreb). Whatever it is, the brand must act now!

 

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8 responses to “Fiat brand is the main obstacle for an eventual sale of FCA

  1. You are looking at volume, which is very important of course… but you can get a better picture if you take into account market share (by segment). SUV is a trend, there is no real benefit (all to the contrary – there are several disadvantages) to purchasing an SUV. Ergo, as all trends, you can expect them to end. If FIAT is capable of remaining leader in the small urban car segment till the wind changes direction, then it may still have a bright future. Also consider that if the future is indeed electric, we will have to go back to smaller more aerodynamic cars. Big 4×4 SUV won’t have much range. #keepupthegoodwork

  2. It’s quite unfortunate, but FCA is stalling the launch of new products for several brands. To achieve net debt zero by 2018, and also because they had to invest a LOT of money in the plant reshuffle in the US to produce the new Ram 1500, the Wrangler, the new Wagoneer/Grand Wagoneer…

    In South America there’s been a drop in Fiat sales because they let their models get too old. They’ve been renewing them in the last year and you can already see some results. The Toro is doing great and brings in cash, the Mobi – despite a slow start – is now selling decent numbers, the Argo came out a couple of months ago and the Cronos was just announced. So sales in Brasil are bound to increase.
    It’s also doing great in Argentina.

    But I completely agree with you in Europe. They delayed the launch of planned products in Europe. Europe should’ve gotten a Punto successor this year, and a Compact SUV. Where are they??? WHere are the Firefly engines in the european segment??

    They simply don’t have enough money to do simultaneous launches in all markets. So they’re focusing on the brands and markets that’ll bring in big profits. This means betting on pushing Jeep in NAFTA, China, India, Europe and South America.
    This means getting a new Ram truck out as soon as possible and new body-on-frame SUVs (Wagoneer and a Chrysler SUV) on the same platform.
    After that, we will see more Alfa and Maserati launches and new Dodge’s.

    What’s the plan for Europe? It’s ridiculous that Fiat has no SUVs besides the 500X and the 500L Cross (which is a nice C3 Aircross rival after the resytling). Where’s the rational B-SUV to compete with the Duster? Where’s a 5/7-seat SUV that undercuts the Skoda Karoq/Kodiaq in price?
    Where’s the Punto successor? Where’s the 5-door Fiat 500 that should’ve occupied the position in the market that the new Citroen C3 occupied??

    PSA is eating Fiat’s cake in Europe. And one just has to look at PSA’s profit margins to see that it’s possible to extract money from the European market. FCA is failing at it.

    And I’ll say more: why, oh why are they not investing heavily in introducing Fiat in India with the Argo and Cronos?? It’s perfectly suited to the Indian taxation system (benefits cars smaller than 4m). Why aren’t they pushing Fiat in Japan??? Fiat has a tremedous expertise in small cars. Guess what’s the biggest developed market for small cars??? They’re even the biggest american manufacturer in Japan! Just introduce them in Jeep dealers!!

  3. I disagree with Felipe, FIAT have made massive strides in quality this past ten years, that’s where peoples perception is stuck in the past, as they say “mud sticks!” I have a 500L Trecking and can honestly say the quality is excellent! in fact I have a friend who owned a 1 series BMW and the quality was shockingly bad with its cheap plastics and poor fit, he had lots of reliability issues with it also. He was impressed with my FIAT and how good it is. They just need to get that across to the general public.

  4. The lack of strategy and/or resources in FCA is easy to see…
    They see internal brand competition as a nightmare while VAG takes it as an opportunity.
    And this is not a FIAT problem, it is in all FCA brands.
    No C SUV in Europe, while they have just launched Jeep compass???Have they learned nothing with 500x and Renegade???
    No Punto replacement???
    No SUVs in Brazil??? It will kill the brand slowly there.
    Tipo in UK without 7“ display???
    No SW and Coupe for Giulia???
    Giulia Veloce in UK is not Q4???
    No petrol version of Levante in UK???
    And so on…

    • They actually released the petrol version of the Levante in the UK already. But in the rest of the things you mention I am also baffled at the decision making at FCA.

      • The first decision was not to bring it to UK…
        Not to mention the lack of a V8 in Levante and Ghibli… and they have one in quattroporte…
        brilliant marketing/sales minds….

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