Last week Sergio Marchionne announced that Fiat plans to increase global sales from 4.4% to 7% over the next five years. This ambitious statement seemed to make investors on Wall Street view Fiat as unstable or poorly managed, because Fiat shares fell 13.5% after the announcement. Today, Marchionne addressed the press in an attempt to try to control some of the damage. The most important message was that the plan is a win-win scenario, where even if Fiat fails to meet its lofty goals, the company will still be as strong as ever, and likely stronger.
An interesting part of the strategy is that they plan to try to introduce 150,000 Alpha Romeos into the United States market. There are currently no Alpha Romeos in the country, so this part of the plan will not just be an expansion on existing sales, but a completely new introduction into a market. To my knowledge, it has been a while since an entire new auto company was introduced to the country, so Alpha Romeo’s entry into American markets will likely give us a lot of insight into the economic state of the country and the auto industry.
Fiat clearly thinks that the auto industry in America is competitive enough that they can start selling with manageable barriers to entry. However, I would guess that there will be more unforeseen obstacles than they are planning on. There are the obvious costs of new factories, parts, and employees, but I think it will be very difficult to immediately gain the trust of consumers, especially over just five years.
How much of a struggle does it look like there will be for Alpha Romeo to enter the American market? Are there any more deceptive barriers to entry?
Source:
http://www.autonews.com/article/20140514/VIDEO/305149999/autonews-now-marchionnes-reason-to-be-jolly
Alfa was in the US for about 5 years in the ’90s. I think the main problem here is how is Fiat going to position it in the market. Because all tiers in America have very strong competitions. I personally think Alfa is in the category between luxury and middle tiers, sort of like Volvo and Acura. There are not a lot of these companies but it takes some work to market this kind of car and convince consumers that there is something unique about it. For example, people will spend a lot of money to buy Volvo for its safety. If Alfa comes back, what would consumers be looking at for this brand?
The last new entry I can think of was Karma, maker of the Fisker. They were immediately preceded by Tesla’s first production vehicle, the model R. Fiat has only come to the united states within the last half decade as well if i’m not mistaken. None of these brands are household names yet (except arguably Tesla). I’m doubting there’s room for Alpha in the US market right now, but during an expansion it seems like almost any brand can sell cars.
I agree that Alfa will experience difficulty entering the US market. Marchionne has proven his savviness many times over, so I think he knows what he is doing. But there are a number of barriers to entry that I can see. Jier mentioned that Alfa is slightly above middle tier on line with Volvo and Acura, but one source says the first Alfas to be introduced in the states will sell for about $75,000, putting it really slightly above a Lexus or Volkwagen. If they are successful, I see them achieving success by creating a niche.
It’s interesting to here that the Fiat stock fell after their announcement that they would almost be doubling their market share. Wall Street understands that it won’t be easy for a company to come in and immediately have success. An announcement like this makes the company seem like they don’t know what they are doing. Something to keep in mind however is that Alfa Romeo has shown success in other areas around the globe like Europe. Although car standards for most consumers vary greatly from the U.S. to Europe, this is definitely a positive sign.