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I think there’s a decent business case if you take the long view
Chrysler Dealer Don Lee gives Automotive News [sub] his take on Chrysler’s pitch to new Fiat/Alfa dealers, thereby confirming that few dealers expect a Fiat franchise to take off in the short term. And for those “decent” long-term prospects, Chrysler’s saying that
a showroom of 2,500 to 3,000 square feet would be sufficient to start… To get there, some dealers are going to have to take it slower. They’ll have to offer a separate showroom but go beyond that as more product becomes available.
So, what will the 500 do for dealers? According to the Pentastar gang, dealers can expect
healthy gross profits of up to $1,500 on each Fiat 500
Lee reckons that figure is “optimistic,” but we disagree. Chrysler has said that 500s will start around $20k, and they’ll have to considering any US-bound 500 that comes out of Chrysler’s Toluca, Mexico plant could be sold for near double that price in Brazil. Per-car profit margins on US-market 500s will be strong… it’s the 50k projected annual sales volume (78k by 2013) that prospective dealers need to worry about.
43 Comments on “Dealers Dish On The Fiat Future...”
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Chrysler has said that 500s will start around $20k…
They’re dreaming in Technicolor.
I would pay $20k. For the ragtop. If it got 40mpg city. On regular unleaded.
Base model? Not so much.
The 500 would be a cute little car for running around town. Since my wife prefers tiny cars and has fond memories of a Fiat her parents once owned, I wouldn’t have any trouble talking her into one. What I can’t get past is the price. A Honda Fit Sport is $3,500 cheaper.
20k? That seems about 5k too high. Unless they expect them to be highly optioned which is certainly possible.
So if you get a middle of the road rate on a four year note, you’re looking at almost $500.00 a month.
I would be hard pressed to pay five bills a month over forty-eight months for the privilege of owning that particular car.
$37k includes tax unlike the American price
I’m curious how many people commenting have actually seen a 500 in person. It’s not your average crapbox and makes the Mini look awkward, both inside and outside. $20K is extremely reasonable, assuming that’s with the requisite bells and whistles.
“$20K is extremely reasonable” … no it isn’t, and yes I’ve seen it a couple of times in Germany. This is a Ford Ka in a fancy dress, and the Ka is one class below the Fiesta. The comparison to the Mini is misleading.
I saw a few in London and I thought they were fantastic looking. I would definitely choose one over a Mini. I might actually buy one of these things if they don’t come out too much different with the Chrysler branding.
Actually, Doc, the Ka is a 500 in a cheap dress. And I’m not sure what’s so misleading about comparing two B-segment cars. If you think the Cooper’s Playskool dash compares favorably, great. I don’t.
http://static.cargurus.com/images/site/2007/06/01/11/26/2007_mini_cooper_base-pic-14190.jpeg
http://petrolheadsonline.com/wp-content/uploads/2009/10/fiat-500-interior.jpg
I thought the Mini is closer in size to the Fiesta than the Fiat 500, but the numbers say it’s only a little larger than the 500. So you’re right, the comparison is adequate.
$20k+ worked for MINI, and slightly for Smart, but I fear that ship has sailed in a sense. Not only due to the economy as a whole, but also due to early adopter weariness and a push towards more practicality and value (like Fit, Golf, Versa, Corolla, and the many other $15k-$20k cars to choose from). I fear this may be viewed in a similar light as the Chevy HHR was to the PT Cruiser–a little late to the cute & pricey party.
For example, what if some relatively unknown electronics company tried to show up in the US and sell an ipod competitor for the same price? They’d be laughed off the shelves. We need more Sandisks and fewer Apples in the world.
It all depends on the price of a gallon of gas.
Remember that they’re selling these things at Chrysler dealers! Short of kidnapping, how do you pull those people through the door?
Seriously, positioning the 500 as a “premium” mini is a helluva challenge. They really need to steal from the 1990 Lexus playbook with a base version under $15K. If the strategy works, the price goes up. Even then, I don’t see how they’re going to move more than 25K units by 2012.
I want a hit of whatever dope Marchionne got those dealers to smoke.
If you saw the car in person, $20k is reasonable. They are much more premium than most Americans are used to in a compact. They would compete with minis more than cobalts.
I think $18k would be the right starting point for this car, it is more stylish than the Fit or Fiesta and maybe they think that it’ll be up to the dealers to go lower than $20k once the initial buzz for the car wears off.
I don’t know. When the MINI was introduced in 2002 you could get a base model at about 15k, even for the 2006 model year you could get one for 16k and an “S” started at around 19 (we bought one of those optioned up to 25k). To do this we configured the car on the web site and sent our configuration to the local dealer. They called us and we sent a deposit check to hold the car. 8 weeks later we picked it up.
I’m having a hard time imagining a scenario where a person looking for a fun, European hatchback would approach a Chrysler dealership. There is just no spirit of “premium” anything associated with Chrysler dealerships. They’d have better luck selling them at Jeep dealers. A MINI at a BMW dealership had the right connotations, a premium hatchback at a Chrysler dealership does not.
Of course today it is hard to keep a base MINI under 20k, but I’ll give the Fiat 500 better odds if they have a starter model around the 16-18k price point.
I’ve seen these in Italy, and they are cool little cars. I haven’t driven one so I can’t provide a direct comparison to the MINI.
It’s a nice car and could be a good seller but no supposedly top tier car company can survive depending on selling small cars in this country. At $20k it’s about 25% too high. But that’s typical for Chrysler everything they try and sell is 25% too high.
Marchionne will meet his Waterloo in Des Moines over this. Those in charge of Fiat / Chrysler simply do not understand the US car market if they think they’re going to be able to sell 50,000 Fiat 500s for $20,000 (base) a pop.
The top seller in the subcompact market is the Nissan Versa. The Versa (sedan and hatchback) has sold around 70,000 units so far this year. It will probably close out the year at around 100,000 units. The base Versa sells for around half (gulp!) the supposed base price of the Fiat 500. A fully loaded Versa tops out somewhere North of $17,000. The Versa is cheap utility, which is what most US buyers want in a small car.
At $20,000 the Fiat 500 will be positioned as a premium subcompact. The market for this type of vehicle is very small in the United States. The only major player in the premium subcompact class in North America is the MINI Cooper / S, which has sold around 19,000 units thus far in 2010. Even if Fiat / Chrysler managed to turn every MINI Cooper / S sale in to a Fiat 500 sale they still wouldn’t get to 50,000 units a year. The only way they’ll reach their target is by drawing customers away from other segments, but I just don’t see this happening.
I don’t disagree with your basic premise, but I don’t think it’s so bleak. MINI has sold around 30,000 units YTD 2010 (not 19,000) and is projecting over 50,000 by year end, with a relatively stale, albeit larger, product lineup. Fiat could do well initially.
Mrhappypants,
Yes, total MINI brand sales are around 30,000 units year to date. However, this includes all models (ie, hardtop @ ~19,000 units, convertible @ ~5,000 units and Clubman @ ~ 6,000 units). To begin with Fiat will only be selling one model of the 500. Fiat won’t be offering a convertible or wagon version of the 500 for the foreseeable future. The apples to apples comparison is Fiat 500 to MINI Cooper / S Hardtop. Someone who wanted a convertible or little wagon is likely not going to be buying a 500.
If Fiat can sell a 500 to every person who was going to buy a MINI Cooper / S Hardtop they’ll get to around 30,000 units for the year.
OTOH, people who want a 500 won’t necessarily consider buying a Mini. And people who want a Mini have the used market to consider (and those buyers aren’t reflected in your numbers). All I’m saying is there are more variables than simply YTD Cooper hardtop sales. 50K is optimistic, but getting there doesn’t require you turn every potential Mini buyer.
Mrhappypants,
I agree that not everyone who is buying a MINI will cross-shop a Fiat 500 (and vice versa). My point is that the premium subcompact market is currently only around 30,000 units. Fiat will likely be able to win over some potential MINI buyers. However, this would only be some fraction of MINI’s current sales. To get to 50,000 units Fiat will have to find a significant number of buyers who otherwise would not have considered a $20,000+ subcompact. Where is Fiat going to find these buyers? What market segment(s) will Fiat be luring buyers out of to get them in to a 500?
Unless you are selling an extremely unique and compelling product it’s very difficult to carve out a new niche. It is much easier to sell a competitive product in an established market (as Nissan has done with the Versa). The Fiat 500 is a good looking little car and it will definitely find buyers. In trendy urban markets like New York City and L.A. the 500 will likely do quite well. But to think that Fiat can sell at the same price point as MINI and outdo them (ie, 50,000 units to 30,000 units) in the first year is an unrealistic pipe dream. The 500 is a premium subcompact with a “retro” design in the same vein as the MINI (and the less premium VW New Beetle before that). It’s not a market maker.
Base Versa in Germany: 15,990€. (see http://www.nissan.de/#vehicles/city-cars/TIIDA )
Base Fiat 500 in Germany: 11,300€. (see http://configurator.fiat.de/motorwahl/default.asp )
$20,000 for a 500 seems VERY counterintuitive. The price of a German-spec base Versa will get you a 500 Sport with the larger 1.4 engine, the Sync-like “Blue&Me” system, nice alloys, sound system, sports seats, xenons and a color screen nav. Add another 1,200 for Poltrona Frau leather seats if you like that kind of stuff.
I agree with TokyoPlumber. The premium sub market is quite small due to the price/size mentality of most Americans for mass market cars. There will be some early adopters…and they’ll pay up to have a Fiat badge. On the other hand, most folks will look around and see what $20k buys them and it’s a bigger car…like a Cruze, Civic, etc. The 500 may be interesting, but its practicality for most Americans is limited.
Make mine an Abarth 500 and I’ll take one for $25k.
Anything less for that kind of money and I’m going to my VW dealer for a GTI.
-ted
What’s the GTI’s base price over there? Here in Germany, a 500 Abarth is 18,500€, while a GTI starts at 27,275€. Not exactly comparable price points.
Mirko, 2-dr GTI in the US is $23,664 base MSRP.
Personally, I’m excited to be able to buy a Fiat 500 or small Alfa again in the U.S., but I have to think that the brand will be a harder sell than Mini in this country. Most Americans had no idea what the Mini Cooper was but despite the separate branding, I have no doubt that the ties with BMW were played up by salespeople… hard not to when they were next door. In essence, the Mini Cooper was the 1-series that should have been despite the FWD.
Fiat quality and reliability are either unknown by U.S. consumers or the butt of jokes, deserved or not. Chrysler vehicle quality is certainly not something to crow about, so that tie-in and shared lots is another negative.
BMW dealers were used to dealing with import-leaning and status-conscious buyers… Chrysler not so much. Not so say that they can’t get past this history, but wasn’t that an issue for Opel/Buick dealers in the 1970s, Merkur sales through Lincoln/Mercury dealers in the 1980s and, frankly, for Alfa Romeo in the early 1990’s when they last tried to sell Italian cars through Chrylser dealers?
Just sayin’. I still want a Cinquecento in white with green and red stripes, manual trans, and a roll-back canvas sunroof and I don’t care whom I buy it from, but I’m known to make strange car purchases.
Fiat is dreaming on both counts, $1500 unit margin is a wet dream for most dealers on anything. IMHO the Mini’s have a distinct performance orientation and a BMW dealer cartel that drives the premium transaction pricing. The 500 design will be 5 years old by the time it gets here, combined with Mexican assembly quality (think VW) again IMHO we will have a cute, interesting and maybe intriguing product with a very short shelf life. How much bigger than a Smart car is it again? Take away any fresh Alfa product and these dealers will wonder what they were smoking in a short time. That is if there are any dealers left. YMMV, as usual.
I agree, this is just salespeak. Nothing to do with reality.
If they can’t hit 50K units (and they won’t) there won’t be the demand to keep the transaction price high enough for the wet dream 1,500k profit.
Initially, a few will be sold for well over sticker, but a month later all the trendies who also have money to burn will have their 500s. Then 500s will sit on the lots as the curious but less trendy compare the price tag with other cars and realize they could have a Sonata for that kind of money.
I’ll say again, Chrysler isn’t even going to get enough dealers to sign up for a Fiat franchise. The economics just doesn’t make sense.
Chrysler’s plant in Toluca has a very good quality reputation and is a state of the art flex manufacturing facility. I can’t comment on VW’s plant because I don’t know anything about it. It may be much older or the work force may be not as well trained as those in Toluca.
I haven’t driven the 500 personally. but in general Fiat is not top of the class. for $ 20K I get a Mazda 3 Hatchback and can park a 500 inside its trunk.
I’m not sure what the European price is, but I’d think it is getting costumers in there that would buy $ 12,000 cars in the US. I really don’t see how Fiat can charge the BMW-premium that the Mini can. At least not so many times.
Audi, Mini etc. prove that one can charge premium for small cars. but they are also able to charge premium for their “normal” cars, unlike Fiat. I don’t think the Chrysler brand will help either, but it might beat Fiat which is either unknown or has a bad aftertaste.
A small expensive car like this really is the iPod analogy someone had above. Without the name you never could sell it for the price. Especially since a car is an investment that someone will sell at some point. I just use my iPod till it dies and it is a little write-off afterwards. With a car people tend to think more, especially when it requires $ 20K.
I haven’t driven the 500 personally. but in general Fiat is not top of the class. for $ 20K I get a Mazda 3 Hatchback and can park a 500 inside its trunk.
I’m not sure what the European price is
The German price is 11,300€. The German price for a Mazda3 with the 2.0 engine is 22,690€. As I wrote earlier, even the 500 Abarth is only 18,500€.
The Fiat 500 is the bargain among the style-focused subcompacts. It costs not even remotely as much as a Mini.
Mirko, you keep quoting the German market prices as though they’re at all relevant. They’re not. Between currency exchange rates, differing margins, differing transport/delivery costs, differing tax structures, differing fuel and operating costs, differing buyer history and knowledge base, different driving conditions and pretty much differing everything else, about the only thing common between Germany and the US market is that cars have 4 wheels in both.
I do have to agree that the numbers may be more than optimistic… and I am inclined to think that these cars will start well below $20k based upon European prices and Mexican productions being what it is.
Whats absurd about everyones argument is that people would rather buy a Sonata or a Versa….. uh…. what? The car is what it is, a fashionable stylish car, its supposed to sell based upon its charming looks and features. There will be plenty of emotional purchases of it. The penny pinching pocket protector crowd will continue to buy the appliances because of “economic sense”
I swear more and more that this site has become “the truth about the tightwads” Since when is a car purchase only about economics? Jeez….
Looking at that image I thought I’d accidentally loaded Photoshop Disasters instead of TTAC! Do the folks in AN’s art dept. think the 500 is intended to compete with the Grand Cherokee? It looks massive…
Back on topic, nice to have some more of that “it’ll cost all the Chrysler dealers $1million to host FIAT” FUD dispelled… Not sure about those volume estimates but it bears mentioning the 500 has been a runaway success here in the UK, and largely in style conscious urban markets. Exactly where the 500 is going to be sold over there…
I wonder how many of the commenters insisting that “MINI already has the premium compact market covered” actually form part of that target demographic? The speed with which “old hat” MINIs were outnumbered by “shiny new” 500s on the streets of places like Edinburgh, London and Manchester when it launched, demonstrates just how powerful a factor “newness” is in the style-driven segment we’re talking about. Makes me wonder if maybe (just maybe) 50k is achievable over there after all?
You have a good point about “newness”. Maybe the 500 will take some sales from MINI. But don’t forget that the MINI is basically a starter BMW while a 500 is a starter Fiat. I think that makes a big difference.
Comparing different car markets as if they all respond to newness in the same way is problematic. The 500 will be sold in a bit more than 100 metro areas that are “small car friendly”, but small to an American can mean C-segment cars as well as smaller ones. Our midsize is D-segment, and some Ds are not that much more money. Smaller J-segment vehicles might be considered as well. If cost differences are not great, American shoppers will move among segments when considering what to buy.
And, while I hate to knock my own country, I have to say I don’t think we have 100+ trendy markets. I think we have about 12. Small car friendly and trendy are two different things. People who aren’t obsessed with being trendy -most people- are going to get a lot bigger car for that kind of money, or a slightly bigger car for a whole lot less money. And many of the choices will have better reps/warranties.
If the selling price is really going to be somewhere in the ballpark of $20K they’ll have a hard time pushing very many units. My wife and I could get a pair of his and hers Hyundai Accents for that kind of money. We could even find some J-segment vehicles in that price range, which we might prefer for the extra room and the 4wd.
Fiat is over estimating the number of car buyers who’s top priority is trendiness. There are such people, but not in large numbers. Most people are boringly practical.
As I see it there are two potential buyer groups, and one shopper group to sell this car to.
Buyer group one – Trendy-Hipsters, who also can swing a loan for $20K, who are not already upside down on their MINI, and will take a chance on a Fiat for the opportunity to be cool. This is a subset of the total Trendy-Hipster set.
Buyer group two – Italian Americans so proud of their heritage that they must have an Italian car and since they can’t afford a Ferrari…. This group numbers about 27. The vast majority of Italian Americans will look at the $20k price tag and say “Hell, for that kind of money I can drive a Sonata”.
The shopping group – people who are looking for a “small” car. They may be curious enough to look at a 500 but they can get more car for their money elsewhere. It will be very difficult to sell to this group. They don’t want a 500 specifically, and the 500 will not compare well to other choices in the market.
Basically Fiat figures there are 50,000 Hipster-Doofuses with money to burn. I don’t think they are correct.
All of these argument are treating this $20K starting price as gospel… and clearly that doesn’t make any sense. Mirko shows that the 500 is cheaper in Europe than a sizeable number of cars… why would it not be here?
This car is going to be produced in Mexico, it won’t have to deal with any currency fluctuations or distance related costs.
I’m also inclined to think that many here really don’t understand that this car will be huge on image alone. It will be the next Mini, based upon appearences in the least, and its cheaper price tag (guranteed) will allow it to have an advantage. Cute as a button, and cheap? Sign me up.
Honestly all these arguments are a little too practical as well… Since when did people only buy a car based in pure economics? I doubt that everybody in the world is an accountant. There is still plenty of emotion involved when buying a car, and this one surely plays off on that.
Honestly though, with all these arguments, it seems that the best and brightest are a bunch of curmodgeonly penny pinchers that only care about the economic bottom line… live a little, drive something a bit more exciting than an appliance!
Or is this site turning into “The Truth About Tightwads”?
Oh and Dynamic… you either aren’t Italian, don’t know any, or don’t live in the NYC metro area. There will be 27 of these…. on one block in the Bronx.
I don’t think the 500 will be a dud. I’ll even rescind my earlier comments about Chrysler dealers. The Americans for whom the “newness” factor is important didn’t mind going into Chrysler or Jeep dealers for the first Grand Cherokee, PT Cruiser or 300. Which just proves Roundel’s right – it is an emotional purchase. I just think the numbers they’re putting out there — 50K sales/$20K per unit/$1.5K profit — are completely out of whack with market realities.
Also, Roundel may be right about the passion of Italian-Americans. The owner of the ristoranteTrattoria Zero Otto Nove in the Bronx’s Belmont section (NYC’s other “Little Italy”) has a 1950s Topolino parked in the outdoor cafe area. You can probably count on him to be an early adapter and key influencer for early 500 sales. But I still think with all the interesting small car options Americans are getting from established brand names, Fiat will be lucky to move 20K units in 2012.
How many new cars are purchased every year as graduation presents as a send off to college, how many of those kids (who really care nothing for cars in the same way that the majority of those on here do) will be drawn to the 500? 50k units in a year really isn’t that much and I think that the $20k price will come down after the early adopters take thiers and the base will be about $15k were differentiation will be enough to move it in a way that the little honda/toyotas can’t (I mean who would feel cool in a fit?). How many people here actually want the car to fail (b/c of Chryco)vs. actually thinking it will fail due to markets?
@rnc: The term for wanting the 500 to fail is called “The Schadenfreude Factor.” If someone knows an Italian translation other than “gioia maligna,” let us know.
Whether it succeeds or not, I expect the 500 will put an end to Mini’s spectacular resale value. Why buy a 2-year old Mini when you can pick up a brand new 500 for the same amount?