Alfa Romeo's high goals doubted by analysts

TURIN -- Analysts are skeptical that Fiat Chrysler Automobiles CEO Sergio Marchionne can achieve his ambitious sales goals for Alfa Romeo.

"Despite our love of Alfa's past, we're unconvinced by its future," said Max Warburton, an analyst at Sanford C. Bernstein.

"While it has history, turning it into a credible premium player will be like launching a new company. It took Audi 20 years or more," Warburton added.

In his view, Alfa's product revival will swallow a significant sum of capital and has no chance of posting profits in its first product cycle.

The Giulia is the first model in FCA's 5 billion euro ($5.6 billion) plan for Alfa. Confirmed by sources so far are three models: the Giulia, a large SUV in late 2016 and a flagship sedan in 2017.

Consultant IHS expects global Alfa sales of 67,500 this year, down from 68,300 last year, with the current, neglected lineup. Minimal investment in the past decade reduced Alfa to just two mainstream models -- the MiTo subcompact and the Giulietta compact, sold mainly in Europe -- and just the low-volume models for global markets, the 4C coupe and Spider.

In May 2014, FCA unveiled a plan for Alfa that envisioned eight new models from 2015 through 2018. The lineup would generate 400,000 global sales by 2018 -- about 150,000 from North America.

Marchionne at last week reconfirmed the 400,000 Alfa sales target by 2018, adding only that a second model will debut six months after the Giulia. 

Warburton estimates that 130,000 of these North American sales should come from the U.S. -- if it were to achieve that 150,000-unit goal. However, he does not see an Alfa range broad enough to reach such a volume. 

"It is clear that in the U.S., car sales grow pretty much in proportion to how many models OEMs offer. Audi sells 180,000 units in the U.S. with over 20 models [on various nameplates], Infiniti 120,000 with about 10 models. It seems inconceivable Alfa could hit its North America target with just two or three cars," Warburton said.

George Galliers, an auto analyst at the Evercore ISI brokerage house in London, said, "5 billion euros and nostalgia doesn't equal 400,000 units in 2018."

In his view, Alfa Romeo is a niche brand favored by enthusiasts who tend to be ruled by their heart over their head.

"Such brands' unit sales growth tends to be strong at first, given low bases and the rush of enthusiasts to the product, but plateaus very quickly as mainstream buyers stay away," he added.

Galliers noted that similar sales patterns are prevalent at other niche brands, such as Maserati and Jaguar.

Galliers called for a "blue sky" scenario where Alfa sales could reach 330,000 units by 2018, while IHS forecasts just 216,000, slightly more than half of the 400,000 target. LMC Automotive predicts 251,000 units in 2018.

"If the Giulia doesn't meet expectations, then Marchionne could finally let it lie" with the brand, said Ian Fletcher, an analyst at IHS in London.