Smart Leaves The US, But Will Fiat Be Next?

Opinion

Not if the Italian automaker can make some smart moves.

It didn't come as a huge surprise to hear the news that the Smart brand will be leaving the United States and Canada. Daimler's quirky city car brand was reduced to selling just a single model called the EQ fourtwo, an electric city car with a tiny 58-mile range. Although the EQ fortwo could be leased for a comically cheap $139 per month, it wasn't enough to entice crossover-loving Americans.

With the Smart brand departing the US market, we looked around the industry to see if we could identify another automaker in a similar situation - declining sales, products that are too small for American consumers, questionable reliability, and an uncertain future. That sounds a lot like Fiat to us.

Fiat returned to the US market back in 2011 with just one product, the lovable but tiny 500. Since then, the Italian brand has expanded considerably with the 500X crossover, Mazda Miata-based 124 Spider, and whatever the heck the 500L is. While the company's lineup has expanded considerably, Fiat has let most of its products go stale in the marketplace and sales have clearly suffered as a result.

In its first sales year in 2011, Fiat sold 19,769 cars, capturing a minuscule 0.15% market share in the US. But remember this was with just one model, the 500. Fiat's peak sales year came in 2014 when it sold 46,121 cars (a 0.28% market share) and the numbers have only declined since then. The situation has become so bad, Fiat only sold 15,521 cars in all of 2018, which is less than when it only offered the 500 in 2011. Things don't look to be improving in 2019 either, as Fiat only sold 2,214 cars through the first three months compared to 4,014 cars in the same period in 2018.

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Fiat is suffering from the same problems as Smart - US consumers prefer big cars. The US love affair with SUVs and pickup trucks is a result of cheap gas (relative to the rest of the word), a large road network, and a culture of conspicuous consumption. In other words, Americans don't want what Fiat is offering. Not only is Fiat's lineup filled with too many small cars, but the brand seems content to keep releasing special editions of existing cars rather than introduce anything brand-new. We know Fiat is working on next-generation vehicles but the Italian automaker really needs to speed the process along.

Rumors indicate the next-generation 500 will be more upmarket and will adopt an all-electric drivetrain, which could be enough to reinvigorate Fiat's sales. But we think the brand needs to do a bit more to win over American consumers.

In order to avoid suffering the same fate as Smart, we think Fiat needs to execute on a few key goals. First, the switch to EVs is all well and good but there is still a significant portion of the population who are not ready for the electric revolution. Fiat shouldn't abandon small, fuel-efficient cars entirely, just in case gas prices rise rapidly as they did in the early 2000s.

Next, we think Fiat needs to stay true to its fun, Italian heritage. This means more performance-oriented Abarth models and extra attention to sporty driving dynamics.

Finally, Fiat needs to build a bigger product, specifically a US-market pickup truck. Other automakers like Hyundai and Volkswagen realize that pickup trucks are starting to become expensive and there could be a market for a small truck in the US. A Fiat truck in the US could sell well and piggyback on the success of FCA's Ram brand. Fiat can still turn things around but it's going to take a massive effort to avoid meeting the same fate as Smart.

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