Only a few weeks ago, we brought you a sizzling story that Fiat is considering its own low cost brand to fight Tantus (VW) and Datsun (Nissan).
Now, AutomotiveNews reports that the Italian automaker has started studying the feasibility of creating a low cost brand for emerging markets.
Fiat CEO Sergio Marchionne told AutomotiveNews that he is wondering whether there is space for a low-cost brand such as Dacia in the Fiat world. As Fiat is moving up the value chain with its products such as the 500L, 500XL and 500X, the focus is shifting towards people in a higher income bracket. Thus, there is definitely room for a low-cost brand with the graduating Fiat brand.
Fiat has tinkered with the idea of a low cost brand for years but senior executives were always worried that the low cost business may not be profitable. However, with two global giants Volkswagen and Nissan ready to unleash a slew of products that will be priced below 5,000 euros, Fiat has no option but to enter the market.
Fiat definitely has ample capacity in its European manufacturing plants which are lying idle owing to a gloomy European market.
As speculated before, Fiat could call its budget brand Innocenti, a contract manufacturing company that was taken over by Fiat in 1990 to build older generation of Uno and Duna for people who couldn’t afford the expensive Punto back then. The Italian automaker is also contemplating other options such as a combination of letters or numbers linked to the idea of a back-to-basics product such as ABC or 123.
All three automakers (Volkswagen, Nissan and Fiat) should learn from Dacia, Renault’s low cost brand, about operating in the low cost market. Dacia has become a cash cow for Renault with its new range of products such as the Duster, Logan and Sandero. With an operating margin of 9 percent it can put most global automakers to shame when it comes to profitability!