FCA 2018-2022: a plan that makes sense

There is one main conclusion from the new 5-year plan of FCA: it makes sense. The company laid out the details of how and what it will do within the next years, with fewer details about who will be in charge and when the goals will be achieved. After the detailed targets set in May 2014, the new plan focused more on the strategies and how the range will be electrified.

The outcome of the Capital Markets day is that FCA is now more solid than 4 years ago, and has a clear outlook on how to deal with the coming challenges. Nevertheless it is weird to see a 5 year plan presented by a CEO that will step down within the next 18  months. In fact, the question of the day is whether this plan will be respected by its successor or not.

However, whoever will lead the company after 2019 is due to address two major issues that were the core of the presentation: electrification and utility/premium vehicles. This is why I think the new plan makes sense. Even if there are still some questions about the electrification plan, the right approach is to focus on what FCA does better (Utility vehicles and city-cars) and high margin products (premium brands).

The two brands in FCA’s name, Fiat and Chrysler, are no longer the priority as they play in the saturated mainstream segments. It is ironic but necessary for the sake of profits. Instead of more Fiats or Chryslers, there will be more Jeeps, Rams, Alfas and Maseratis, or more cars with high margins. The big question now is whether FCA will become a volume manufacturer or a margin player.

Product offensive

Jeep continues to be main driver of volume and growth. In order to keep the growth pace, FCA must enlarge the current range and offer AFV. And that’s precisely what they intend to do within the next 5 years. They will add an A-SUV that will sit below the Renegade for Europe, India and Brazil. The range will also grow thanks to a luxury SUV to sit above the Grand Cherokee, while a pickup will bring more clients in North America. Remaining question: why the full-size, luxury SUVs won’t have an electric version?

Ram is a new protagonist. The big potential of this brand is finally at the core of the plan with future investment that includes two new key products: the anti-Raptor Ram and the midsize pickup. While the recently launched Ram 1500 is already posting good results, the two new additions will certainly help to achieve the 1 million units goal by 2022.

The group will insist on the premium pole despite the difficulties it has encountered. While Maserati struggles, Alfa Romeo grows thanks to the Stelvio, but both brands need more cars and alternative fuels. The new combined target is 500.000 units by 2022, which is quite far from current levels (this year both brands are expected to sell around 190.000 cars). However, with the right SUV approach and quality EV, PHEV and mild hybrids, the premium brands of FCA could gain traction.

Fiat, Chrysler and Dodge represent 20% of the company’s expected profits, according to Marchionne. This is why they didn’t have dedicated presentations during the Capital Markets day. In the case of Fiat, the new strategy points at two different brand approaches for each of the markets where it succeds: Italy/Europe and Brazil/Argentina. It makes no sense to keep pushing Fiat as a global brand when a big part of the population doesn’t know it, doesn’t find it appealing (did anyone say lack of SUVs?).

In Europe, Fiat survives thanks to the 500 and somehow to the Panda (it is not popular outside Italy). Fiat is so strong with its city-cars that it even beats Volkswagen by far. And small doesn’t mean unprofitable, just as the iconic 500 does: it is 20% more expensive than its rivals and still the top-seller of the segment. With the new plan, Fiat is expected to launch an all-new 500 in 2019 with mild hybrid and a full-electric version in 2020.

Based on the new plan, Fiat will replicate the Mini brand case, which has been growing thanks to its small and exclusive cars. It was already anticipated by an article published here some months ago. Under the new plan, Fiat Europe will be a direct rival of Mini and therefore its sales volume is likely to reduce by one third, based on the current figures for the 500 family and Panda. The remaining question here is: will Fiat get more SUVs?