Fiat builds on its strength – minicars – to revive slumping sales

Fiat aims to win back customers to its core brand with a two-pronged model strategy for the upper and lower ends of the mass-market.

The Fiat Panda and 500 model lines are likely to be expanded from a combined four minicar variants to 12 derivatives that cover the minicar, subcompact and compact segments.

Fiat brand CEO Olivier Francois said the Panda family will be aimed at budget-conscious customers while 500 models will target buyers willing to pay extra to have a more premium product.

"The Fiat brand has two dimensions, Panda-500, functional-aspirational, left brain-right brain," Francois told Automotive News Europe.

The Panda will become a model family designed around functionality, ease of use and value for money, he said. The 500 family will appeal to customers looking for features associated with premium cars such as striking design and good connectivity.

"Every 500 model should have a strong style, as well as a coherent personality and features so it can properly fight in the premium part of each segment where it competes," Francois said.

He declined to discuss in detail how the 500 and Panda families could evolve.

Below is how the strategy may be implemented, according to company and supplier sources.

More Pandas

Panda S: The Panda minicar may be renamed the Panda S. Next year Fiat will add an SUV-styled variant of the Panda 4x4, similar to the four-wheel-drive Panda Cross that was offered in the previous Panda generation.

Panda L: The Bravo compact car could be replaced by a car called the Panda L. This could be either a crossover to rival the Nissan Qashqai or a multi-functional model to replace the Fiorino Qubo car-derived van. The timing of this model is unclear. Fiat needs to compete better in the compact car segment, Europe's second-largest after subcompact by volume. Fiat sells fewer than 800 units a month of the aging Bravo compact in Europe.

Panda XL: Fiat is evaluating whether to tweak the front-end styling of the Freemont large crossover to create the Panda XL. The Freemont is built by Chrysler in Mexico and is the European version of the Dodge Journey.

500 range expands

500 minicar: Fiat likely will make minor tweaks to the three-door 500 hatchback's retro-styled exterior in 2015 and add a new interior with upscale connectivity features. Fiat likely will concentrate 500 global production in its Tychy, Poland, factory. Currently, Tychy builds 500s for Europe while Chrysler's plant in Toluca, Mexico, supplies the car to the North American and Chinese markets.

500 subcompact: Fiat is working on a five-door, five-seat 500 subcompact hatchback that would replace the aging Punto and slot between the 500 minicar and the 500L small minivan. Fiat plans to build 180,000 units a year of the new, unnamed model, tentatively due in 2016. The model could be a radical re-skin of the current Punto or a new vehicle built on a widened version of the Lancia Ypsilon's underpinnings.

500L minivans: The 500L range comprises the five-seat 500L, five- and seven-seat 500L Living minivans and 500 Trekking, an SUV-styled variant that offers improved traction because of an electronic-controlled differential. The 500L subcompact minivan replaced the Idea in Fiat's European lineup. The 500L Living replaced the Multipla and competes in the compact minivan sector. The 500L range is built at Fiat's factory in Serbia and sold in global markets.

500X SUV: The 500X, which is being developed alongside a Jeep subcompact, will replace the slow-selling Sedici small SUV built by Suzuki. The 500X will rival the Nissan Juke and offer front- or four-wheel drive. The 500X and Jeep variant will be based on the same Small U.S. Wide platform that underpins the 500L. They will be built at Fiat's plant in Melfi, central Italy, with output of the Jeep starting in next June and 500X production three months later. Suppliers estimate annual output will be 150,000 units for the Jeep and 130,000 for the 500X.

Market changes

Francois said the strategy responds to the changing buying habits of European customers who are going upmarket and down-market. Upscale buyers are opting for smaller premium cars from Audi, BMW and Mercedes-Benz instead of choosing volume brands such as Fiat, Ford and Renault -- or they choose a value car from brands such as Hyundai, Kia and Dacia.

The 500 and Panda families account for two out of every three Fiat brand cars sold in Europe following full availability of three variants of the 500L, according to JATO Dynamics data (see table). In the same period last year, the two product lines accounted for about 57 percent of Fiat's sales in Europe. The question is whether such a heavy reliance on small cars, which typically earn small margins compared with larger models, will be enough to both increase sales and end Fiat brand's financial loses in Europe. Through three quarters Fiat brand's European sales are down 2 percent to 442,894 units, according to JATO Dynamics, while Fiat Group's European operations, which also include Alfa Romeo, Lancia and Jeep, reported a first-half operating loss of 185 million euros.

Fiat's strategy "will take time and carries significant execution risk," according to Fitch Ratings. It said other mass-market brands are following the same route in an extremely difficult competitive environment.