Fiat's SUV weakness causes concern

The 500 hatchback will be joined by a re-boot of the 500 Giardiniera wagon, shown here in its earlier guise.

Fiat Chrysler Automobile's decision to shrink its Fiat brand in Europe to include an electrified 500 family and its popular Panda hatchback is a smart one, industry watchers say. JATO Dynamics analyst Felipe Munoz said that by making the move Fiat brand avoids competing with the big players in Europe, especially in non-growth segments such as small and compact cars. He and other experts worry, however, about the brand’s ability to compete without adding models in Europe’s fast-growing sector.

"If you don't have SUVs today, you can’t grow in the EU or in global markets, especially if your best-seller is an 11-year-old minicar," Munoz said.

FCA did not address is SUV weakness when it announced its new five-year plan on June 1. It did, however, confirm the addition of a 500 Giardiniera station wagon, the axing of the Punto subcompact and the withdrawal of the Tipo compact from European markets.

"The space for Fiat in Europe is going to be redefined in a more exclusive area," FCA CEO Sergio Marchionne said during the unveiling of the plan. He said Fiat needed to cut products that lacked pricing power. "Given the EU’s [future emissions] regulations, it is very difficult for mass-market carmakers to be very profitable," Marchionne said. The 500 and Panda minicars are the two models in Europe "where Fiat can play best," Marchionne added.

“The decision to concentrate the limited resources on the highest-margin brands like Jeep, Ram, Maserati and Alfa Romeo is consistent with FCA’s strategy of getting the best returns on capital employed,” said Banca Akros analyst Gabriele Gambarova.

According to JATO, the 500, 500X, 500L and Panda accounted for 69 percent of Fiat’s European sales last year. The 500 was the region's No. 1 minicar last year, with 190,389 units sold, according to JATO figures. The 500 was followed by the Panda with sales of 187,682. Both Fiat models easily outsold the No. 3 model on the list, the Volkswagen Up, which had sales of 98,929. The 500 will get full-electric and mild hybrid powertrains. The 500L and 500X will get mild hybrid powertrains but no full-electric versions.

"Our plan is to focus the Fiat brand on products that are able to cover the cost of the new electrified technologies," Marchionne said. The full-electric 500 will give Fiat a car that will appeal to buyers in cities where access to internal combustion will be restricted, he said.

Ian Fletcher, an analyst at IHS Markit, said Fiat likely will need to promote sales of its new full-electric models by various means such as sales to car-sharing programs and business fleets.

The new Giardiniera, whose powertrain lineup will include a full-electric version, revives a nameplate used for a Fiat miniwagon that was built into the 1960s.

Marchionne said the Turkey-produced Tipo compact family will be discontinued in the EU once stricter emissions rules are in place because “the technology to make the car viable for EU standards is too costly." The various Tipo versions will continue in the markets in Europe outside of the EU, and also in the Middle East and Africa.

Harald Wester, FCA's chief technical officer, said the new battery electric 500, which will also be sold in the U.S., "will sit on a dedicated architecture." A mild hybrid 500 will also be launched.

Chief Financial Officer Richard Palmer said the electric 500 will be introduced as soon as possible to try to fulfill the 2020 EU emissions targets. FCA's 2022 business plan presented in Balocco “is front-loaded with battery-electric vehicles to try and maximize the benefit in terms of CO2," he said. If a delay were to occur, FCA could decide to sell fewer cars that with higher emissions. To pay the potentially huge fines, Palmer said, “is not an option.”

Marchionne said the 124 Spider will also continue, "especially given that we have a commitment with Mazda to buy it," he said. The Japanese automaker builds the 124 Spider in Japan on the same platform as its Mazda MX-5 roadster.

Fiat brand was once among Europe's top-selling brands, competing with Volkswagen marque for the top spot in the 1970s and 1980s. Last year Fiat's market share in the EU and EFTA markets was 5.0 percent behind the German luxury brands – Mercedes-Benz had a 5.7 percent share, BMW 5.3 percent and Audi 5.3 percent, according to data from industry association ACEA. VW brand's share was 10.9 percent.

This story is from Automotive News Europe's latest monthly magazine, which is also available to read on our iPhone and iPad apps.You can download the new issue as well as past issues by clicking here.

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