Fiat Chrysler Invests $4 Billion Into Brazil To Regain Lost Market Share

Fiat is reaching to Brazil to expand market share
Fiat is reaching to Brazil to expand market share

Fiat Chrysler Automobiles is investing $4 billion to bring new vehicle models to Brazil. According to Bloomberg, Fiat is expanding production at two local factories to regain its lost market share in Latin America.

FCA Chief Executive Officer Mike Manley says the spending will go toward increasing the company’s annual capacity at a Jeep plant in Pernambuco from 250,000 to 350,000 units. FCA will also build a new plant to produce more efficient turbo engines.

“We want to make sure the Fiat brand remains very strong in Brazil’s marketplace,” said Manley. “The Fiat brand is a vital part of our business.”

Manley says FCA will be developing 15 new, refreshed series models for Fiat. The company will also produce 10 new models for its Jeep and Ram brands by 2024.

However, auto experts point out that Latin America is critical of FCA’s plans to grow their business globally. Latin America is the only other region besides North America where Fiat made money in the first quarter of 2019, pulling in $117 million in adjusted earnings before interest and taxes. But despite making revenue, Fiat only managed a profit margin of 5.4%.

Fiat first opened a plant in Brazil in 1976 where the brand led sales in the country for 12 years. In 2015, Fiat merged with Chrysler in an effort to become a more global brand. Unfortunately, by pouring most of its resources into its Jeeps, Fiat fell to third place in Brazil’s auto industry.

Brazil isn’t the only country where Fiat Chrysler has been feeling the heat, either. The Fiat 500 made its debut in the U.S. in 2012 when the Italian company hoped to spark a small car revolution. But since Fiat merged with Chrysler in 2015, the Fiat models have been few and far between on American roadways.

This may not come as a surprise considering the most popular auto brands in the U.S. are Japanese and American. In 2016, Honda developed two out of the top five top-selling cars in America: the Honda Accord and the Honda Civic.

Fiat was originally hailed as Chrysler’s ticket to a small-car renaissance following its near liquidation in 2009. But while Fiat Chrysler Automobiles thrives thanks to its Ram trucks, SUVs, and Jeep, the company’s Fiat brand is disappearing.

“You have a lot of things working against it,” said Tom Libby. Libby is the auto analyst for IHS Markit, a data and information provider. “The brand doesn’t have any products in the categories that are thriving.”

The small, two-seated Fiat cars relied on its eco-friendliness and gas mileage to gain popularity among its audience. But as bigger vehicles also became eco-friendly and electric vehicles came onto the market, interest in passenger cars plunged.

In 2016, there were 268 million registered vehicles (8 million of which were diesel passenger vehicles) on the road in the U.S. Today, more cars on the road are SUVs. After hitting a high point in 2014, Fiat’s vehicle sales in the U.S. dropped 66% over the next four years.

“I really do love the way Fiat looks, but it didn’t seem like a sensible purchase,” said Candace Gallagher, a prospective buyer from Philadelphia. “The whole allure of a Fiat is that it’s tiny. You can’t fit much in there.”

Many American drivers also cite quality problems as a reason not to invest in Fiat vehicles. In J.D. Power’s 2019 U.S. Vehicle Dependability Study, which assessed the performance of three-year-old vehicles over the last year, Fiat ranked lowest.

It’s true that 77% of cars on the road are in need of some form of maintenance or repairs, which could explain away Fiat’s low ranking. But Fiat also tied for last in the Consumer Reports’ 2019 Brand Report Card Rankings, which assesses brands based on their new-vehicle performance, reliability, and owner satisfaction.

“Fiat brand results continue to be skewed by limited models and sample sizes,” said FCA in a statement following the report. “We encourage people to experience Fiat vehicles for themselves, and we thank our loyal customers who continue to love our Italian-designed, fun-to-drive vehicle lineup.”