by David Zatz
Before discussing Chrysler and Fiat by region, it may help to look at FCA’s market share by continent / region. (You can ignore the following text and just read the charts.) The highest share is in Latin America (LATAM), where Fiat and Chrysler together (mostly Fiat) have 16% of the market; in Brazil, where Fiat is madly building new plants, it’s now a 22% share. Their second best is in the much larger North American market; there, Chrysler and Fiat (mostly Chrysler) has a 12% market share, slowly rising. Then in the Europe/Middle East/Africa region, Fiat and Chrysler (mostly Fiat) have a 5% share, which is higher in Europe than in the full combined region. Finally, FCA has an almost imperceptible less-than-1% share in the Asia-Pacific region.
Sergio Marchionne talked about FCA’s operations in North America, where the company now has 71,100 employees — quite a few more than in 2009, when there were just 46,000. The largest gain is, not surprisingly, in manufacturing — from 33,100 to 51,800 — but each segment has seen increases.
The company has invested around $4 billion in North American assembly plants over the last five years, with shifts and capacity increasing in six of them. Another $4 billion was put into powertrain plants, with Mack Avenue rescued from a planned shutdown. Utilization was at 109% in 2013, and is planned to be at or above that level through 2008. (This is based on Harbour standards.)
While many Chrysler and Fiat projections are aggressive, Mr. Marchionne pointed out that the 2009 plan was hit nearly dead-on. He predicted 1.2 million sales in 2009, which were delivered; and 2.1 million sales in 2013, which the company also reached. At the time, many reporters believed the numbers for 2013 to be unrealistically high. Each Chrysler brand grew.
The company plans to deal with sales growth both by raising production and by importing from other regions — with domestic production see as going from (2013 to 2018) 2.1 to 2.6 million units, and imports going from 32,000 to 360,000. Exports are also projected to increase, from 253,000 in 2013 to 380,000 in 2018.
Chrysler gained the most retail share of any major automaker in the US, at 3.3 points, followed distantly by Subaru (0.5), Hyundai-Kia (0.4), and Audi (0.3); all others lost share, with Honda and Toyota losing the most (1.3 and 1.4 points, respectively).
In the US, going through the end of April, Chrysler gained even more, thanks to a surge in Ram sales — 4.4 points; in Canada, 5.1 points. In retail, the gains were even stronger, with Chrysler share rising by 6.5 points in the US. In Mexico, the story was different, with total share dropping from 11.4% to 7.2%, as an alliance with Hyundai was dropped and low-margin cars were taken out. (Other sources claim ill-advised sales of a variety of models, including Patriot, to the police reduced retail demand, as well.) Replacements for the Hyundais are in the plan.
Mr. Marchionne said the ideal was to have fleet sales at 20%; they were at 36% in 2010, and at 22% in 2013. Chrysler residual values have increased by nine points since 2009, versus an industry average increase of six points.
The company is predicting that Jeep, Ram, Chrysler, and Fiat will all grow by 2018 — but that Dodge will, as a result of its new focus, actually sell fewer vehicles, dropping 10% from 736,000 to 660,000. Jeep is to rise by 44%, to 800,000; Ram by 34%, to 620,000; Chrysler by 132%, from 332,000 to 770,000; and Fiat by 67%, to 100,000.
Even after shrinking, Dodge is still predicted to out-sell Ram, and to sell twice as many vehicles in 2018 as Chrysler brand does today.
Jeep chief Mike Manley discussed Chrysler’s expansion in the Asia-Pacific region. Fiat currently has 208 dealers in China, 100 in India, and 162 in the rest of the region; Chrysler has 188 in China, none in India, and 208 in the rest of the region. China is the world’s largest automotive market, and is projected to remain so through 2008, increasing in size. India is expected to surpass Japan as the region’s second largest market in 2018. Sedans remain the dominant body style, particularly compact sedans. However, utilities are growing.
FCA plans to grow from 200,000 sales in 2013 to 335,000 in 2014, based on roughly equal parts Fiat and Jeep growth. Sales in China have been increasing since 2009, thanks largely to new product launches and the addition of new dealerships. Nearly all FCA brands are sold in China; but since imports are heavily taxed, local manufacturing is important for sales. Recent joint ventures will help boost Jeep as a player in the market.
Fiat will also be increasing local production beyond the current Viaggio and Ottimo, adding 500X in 2018 and a midsized sedan in 2016. The company will continue to import Freemont (Dodge Journey) and 500/500C, adding 500X in 2015. The Dodge Journey itself is shown in one chart, but not in others.
The need for local production is shown by one chart, where the Compass is shown with no duties, covering 43% of its segment’s price range, and with import duties, covering 6.5% of the segment by price. With local production and the launch of Alfa Romeo, FCA plans to go from 235,000 units in 2013 to 850,000 in 2018 — dominated by Jeep, then Fiat.
In India, projected to be the world’s third largest auto market by 2018, hatchbacks are the largest segment, with utilities expected to beat sedan sales in the future. Midsized and larger vehicles are under 10% of the industry. From 2009 to 2013, sales were falling; FCA restructured its distribution network in 2013, resulting in rapid sales growth. Much of the future growth is to come from Jeep, which will be importing the Wrangler and adding locally-built Grand Cherokees and Compass-Patriot replacements. (The chart below seems to have errors.)
At the moment, there is a single joint venture plant in India, capable of building three models on one platform, and one engine plant that can build three engines and one transmission. By 2018, FCA intends to increase capacity from 135,000 vehicles to 245,000; and build six models off three platforms. The powertrain plant is to go up to building six engines and three transmissions, with the same engine production but another 30,000 transmissions. Overall, sales are to rise from 10,000 in 2013 to 130,000 in 2018, with Jeep — introduced in 2015 — to be responsible for only a fraction of sales.
As for the rest of the market, the ASEAN region — Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam — is believed to have the strongest growth over the next five years, outside of China and India; Japan, Australia, and South Korea are not believed to be changing much. FCA is planning growth outside of China and India to mainly be driven by Jeep, with contributions from Dodge, Chrysler, Ram, and Alfa Romeo, as well as rather more substantial contributions by Fiat. Most growth, overall, is expected to come from local production, followed by new models being imported.
Fiat Chrysler Automobiles released its plans for Latin American expansion today. The company has already gone from 18,500 to 25,800 active workers in the region, with numerous plants and highly flexible production at its new sites.
Fiat plans to introduce Jeep in Brazil, where 278,000 SUVs were sold in 2013, later this year, grabbing an increasing share, particularly in 2015 and 2016. The Renegade will be produced locally in 2015; Cherokee, Wrangler, Grand Cherokee, and “one more” (probably the Compatriot replacement) Jeep are planned for sale. Jeep dealers will use the existing network where possible, but with “rigorous prerequisites for multi-brand formats;” they plan on having 110 dealers by 2015 and 250 by 2018.
Fiat and Jeep are to be the major drivers of growth in Latin America, with Dodge, Chrysler, and Ram remaining minor players and staying at their current level.
Nearly six million cars and trucks were sold in Latin America in 2013 — 3.6 million in Brazil, 0.9 million in Argentina. Fiat Strada has 50% of the small pickup market in Brazil (selling 123,000 units). Brazil has gone from 25 models in 1992 to 220 in 2013; the top four manufacturers are Fiat, VW, GM, and Ford, with a combined 67% share. FCA currently has a 23% share, relatively stable over the years.
Willys-Overland once had a plant in Brazil; Jeep, in need of another 250,000 SUVs per year in capacity, will be moving back to the large South American nation, according to Fiat’s Stefan Ketter.
Fiat’s Betim plant in Brazil will be able to build a car every 20 seconds in early 2015, with six body-in-white lines and four assembly lines. It will be Fiat’s largest single industrial project, ever, with an on-site supplier park and surrounding space protected to expansion will be possible.
The first product will be the Jeep Renegade; two other vehicles will be added in 2015 and 2016, using the small-wide architecture.
In Europe (including the Middle East and Africa), the traditional mainstream customer is, according to IHS data, dropping from 70% of the market in 2004, to 56% in 2013, to 42% in 2018. Both premium customers (18% in 2004, 25% in 2013, to 30% in 2018) and budget-conscious customers (12% to 19% to 28%) are growing as a share of the market.
In response, FCA is changing its portfolio, partly be restarting Alfa Romeo and increasing Jeep’s presence in “the Premium battlefield.” Fiat is being reshaped to reach both high-margin objectives and budget-driven demand. The goal is to keep leadership in mini car, light commercial, and small MPV segments; regain Fiat’s key position in compact cars; and take a primary role in SUVs, crossovers, mid-to-large cars, and pickups.
Jeep is to be coupled with Alfa Romeo at dealerships, to emphasize a “premium quality customer experience.” Overall, Jeep is to increase its sales network by around 25%.
The company hopes to increase Jeep sales from 50,000 today to 270,000 in 2018, a massive increase presumably fueled by Renegade and Cherokee. Other Chrysler vehicle sales — Lancia, Dodge, Chrysler, and Ram — were shown, though, as falling from 110,000 to 80,000 per year. Alfa Romeo is poised to leap from 70,000 to 150,000, while Fiat itself is seen as moving from 620,000 to 730,000 in 2018. (Maserati and Alfa Romeo were not included in the chart. Abarth is included with Fiat figures.)
The company predicts that Italy will be the single largest buyer of FCA vehicles in Europe/Middle East/Africa, with 400,000 sales in 2013 and 500,000 in 2018; the rest of the “European 28” and EFTA countries will account for slightly more (500,000 in 2013, 600,000 in 2018); and Middle Eastern/African countries will double in sales from 200,000 to 400,000, according to the projections. Domestic production alone will not bring European factories to 100% use; the company plans to export around 40% of its production in 2018.
Also see: Can they do it? • Fiat Group 2014-18 • 2009 Plan • 2012 Plan • upcoming Chrysler cars • 2015 • 2016
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