Everybody is wondering about the future of Fiat brand after Marchionne’s statements during Geneva motor show. This is called the “big issue” among FCA’s top managers as is not clear what it is supposed to be done regarding the Italian brand. While there has been a lot of speculation about a possible acquisition by the Chinese, the priority, according to the CEO, is to improve the profitability of the company. But Fiat remains a big question mark.
Why? Because as I wrote in a previous article, the brand is not attractive and doesn’t have any growth potential anywhere except in Brazil. They waisted valuable time during the recovery years in Europe with very few launches, staying behind the mainstream competitors in terms of offer. Peugeot, Renault, Volkswagen and Ford made use of the increasing demand between 2014 and 2017 to improve their positions through the launch of new generations of their popular subcompacts and compacts, and the introduction of new SUVs.
It wasn’t the case of Fiat, which continued to depend on its city-cars, almost disappearing from the subcompact segment, and with a small presence in the SUV segment. The result is that Fiat Europe has now a very old range of products (an avarage of 8 years old), and a small market share outside Italy. The worst is not to have a successor for the Punto, but to have such a small presence in Europe’s driver of growth, the SUV segment. The 500X is Fiat’s only SUV, which was launched in 2015 and posted its sales peak in 2016. While one in three of the cars sold in Europe are SUVs, the 500X counted for 8,7% of Fiat’s EMEA sales in 2017.
Therefore it is not surprising to hear the latest statements from Sergio Marchionne. In Europe the brand is not what it used to be, and Brazil is the only remaining market where it has a potential. So what to do with it? It is hard to revert this trend because Fiat doesn’t have a good reputation in Europe. It is true that VW Group arrived late to the SUV party, but it has an excellent rate among the European buyers.
The bad reputation of Fiat is partly explained by the lack of clarity regarding its positioning: it wants to be recognized as a mainstream brand just as Peugeot, Volkswagen or Renault, playing in the same price ranges; but at the same time its cars are quite aged with poor technologic features and low perceived quality. If Dacia, hitting from below, is added to this situation then Fiat is right in the middle: it is neither a real mainstream brand nor a low-cost one. The only exception to this is the Fiat Tipo, which actually sells well and not only in Italy.
Based on this complicated situation, Fiat could focus its efforts on doing what it does the best: iconic cars. If the Fiat 500 is still selling well despite its age, then cars like this is what the brand must continue doing in Europe. The market is already saturated of mainstream and premium cars, but there’s a limited offer of iconic cars. Fiat would become a “mainstream niche brand” known for its charming small hatchbacks and its original small SUVs. These cars would find fewer clients but it would be compensated by a higher price (higher margin), just as it happens now to the Fiat 500, a semi-premium city-car.
This operation would exclude experiments like the Fiat 500L, which is closer to the Panda’s concept than the Fiat 500. The new positioning would bring back historic nameplates that worked well in the past and could be appealing to the current drivers. These models could be the perfect cars for eventual autonomous driving fleets, as interior details and comfort are set to become the points of differentiation of this new way of mobility. Last but not least, the immediate future of Fiat is extremely vulnerable and nothing is granted, especially now when Marchionne is about to leave the company within the next 24 months. Anything can happen.