TURIN -- Fiat is considering launching a low-cost sub-brand to rival Renault's Dacia, CEO Sergio Marchionne said. If approved, cars for the brand would be built outside of Europe to reduce manufacturing costs.
Fiat mulls low-cost brand, Marchionne says
"We are wondering if there is space for a low-cost brand such as Dacia in the Fiat world," Marchionne said on Sunday in an interview at the Carignano theater in Turin.
Fiat has plenty of spare capacity at its Italian plants but Marchionne said the automaker could not make a profit building a car in its home market that would sell in Europe for 7,450 euros. He said Fiat is currently analyzing its manufacturing capacity outside of Europe to see if a low-cost brand is viable.
Back on table
Fiat has looked at a low-cost brand over the past five years but not gone ahead with such a project because executives were worried that the business plan was not profitable.
Among names considered for the brand were Innocenti, an Italian brand Fiat bought in 1990. The brand launched the Innocenti Mini in 1974, styled by Bertone and based on the underpinnings of the original Morris Mini. Other options included names where a combination of letters or numbers linked to the idea of a back-to-basics product, such as ABC or 123.
The low-cost brand project is now back on the table as Marchionne wants to move the Fiat brand more upscale, concentrating on two families of near-premium models based on the iconic 500 and Panda minicars. "We need to see if there is a space left below after the Fiat brand moves up," Marchionne said.
Other automakers are launching or considering budget brands to meet growth in the segment in emerging markets such as China and India and growing demand for "crisis cars" in austerity-hit Europe.
Nissan will sell its revived Datsun brand in Russia, India and Indonesia starting in 2014. Volkswagen CEO Martin Winterkorn said at the Detroit auto show last month that a decision on a budget car for emerging markets would be taken this year. VW is looking at a price range of between 5,000 and 10,000 euros and may build the car in China, sources said.
Despite its low retail price, Dacia is a cash cow for Renault. Morgan Stanley estimates that Dacia has an operating margin of 9 percent, which is more common for premium automakers.