The Fiat Palio is dead, long live the Palio

The Fiat Palio is dead, long live the Palio. After 21 years in the market, this important car is officially discontinued and no longer makes part of the Fiat range in Latin America. The recent introduction of the Fiat Argo was its death sentence, as the new car sits in the same segment but looks more modern and is intended to give Fiat a second life in Brazil. The Palio wasn’t the only model to disappear. Along with the Palio there is also the Fiat Siena, the sedan version of the Palio, which was introduced in 1997 and was still available until last month.

Both cars mean a lot for Fiat. The Palio and Siena gave the boost Fiat needed in Brazil to start leading a market that wasn’t a key one by that time. In 1996, Fiat had a strong dependence on Italy, and its Brazilian division produced old cars that didn’t feature the appeal that the public was looking for. As the consumers were becoming more demanding and Brazil was turning into a key global car market, Fiat took the decisive step and launched its project 178 which in the commercial world took the name of Palio and Siena.

It is still considered one of the most important launches in the history of Fiat. It was an ambitious project that aimed to give the brand a global profile by having its first global car. Yes, the Palio was initially conceived as a subcompact not only for South America but also for Europe, India, South Africa, Russia and even China. Fiat was globally positioned as one of the leaders in the city-cars and small cars segments, and the Palio was there to confirm that.

Sales started in 1996 becoming the 4^th best-selling car in Brazil. One year later the Palio reached its historic sales peak with almost 340.000 units, only behind the Volkswagen Gol, its eternal rival. Fiat had to wait 18 years to beat the Gol, in 2014, when the Brazilian economic crisis hit the market. Brazil was not enough and soon the Palio started to be commercialized in Argentina, where it has been also one of the top sellers these years. In 1997 the first units arrived in Italy, where it was positioned between the Seicento and the Punto. Production started in 1997 in Poland, Venezuela and Morocco, and one year later in Turkey. Indian and South African production started in 1999, and then in 2002 it was the turn of China and Egypt.

Despite the initial good results outside Brazil, it was soon evident that the Palio was going to follow the usual trend seen in other Fiats. As European sales dropped by the year 2001, the company decided to explore other markets. India and China were the next countries where the Palio was supposed to replicate the Brazilian success. However, the car didn’t meet the targets forcing the company to shut down the production. Russia and Turkey were also part of this car, but with a different name, the Albea.

Since 2011, the global project car became a regional player as it was only available in Latin America, with Brazilian sales counting for around 85% of the total. The dropping sales abroad were partly explained by the fact that it was an old car that never got renewed, as the first generation Palio lasted for 16 years with three restylings introduced in 2001, 2004 and 2007. The car that represented the new Fiat was now an aged and low quality subcompact that reminded the world that Fiat was still laying on old technologies.

Actually, the first generation Palio survived until this year, as it was positioned below the second generation, introduced in 2011. It was more modern but it wasn’t a global project anymore. The main problem with the second generation Palio was that it arrived just before things got very bad with Brazilian economy. Sales for the first year outpaced the 200.000-units mark, followed by stable years in 2013 and 2014. But in 2015 the big shake started with volume dropping by 37% for the Palio and 18% for the Siena/Grand Siena. The fall accelerated in 2016 at -48% for the Palio and -44% for the Siena/Grand Siena. In two years the volume for the two models shrunk from 302.000 units in 2014 to 98.000 units in 2016.

But it wasn’t just a matter of economic downturn. Another reason for the Palio’s drop is related to the way the Brazilian consumer is evolving. Unlike Europe, where the VW Golf has ruled for years thanks to a mature market composed by pretty conservative drivers, Brazil is a young and big economy where its consumers are starting to ask for better equipped cars more in line with the international standards. The Palio was part of the past, and Fiat needed to give fresh air to its image right in a moment when the worst of the crisis has passed, and forecasts show positive numbers. SUV boom has also spread in Brazil with the subsequent effect on the traditional segments. The Fiat Argo and Cronos are set to continue the legacy of a car that saved Fiat from bankruptcy and allowed it to lead one of the key global markets.