Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 32 n° 250

On Fiat’s Strategy and Plans for Russia

Posted by fidest press agency su venerdì, 2 marzo 2012

Fiat 131

Fiat 131 (Photo credit: JoRDaN-YeaH!♦♣♥♠)

London. The Russian SUV segment looks really promising – sales are expected to increase by 87% by 2018, surpassing the 1 mln mark and capturing around 25% share of the light vehicle market (increasing from current 22-23%). That is the reason why most of the global OEMs look at this segment with high interest. Hence Fiat’s plan to start local production of Jeep brand makes perfect sense. Although being economically challenging (it usually takes 5-6 years for an automotive factory to start paying off initial investment, and by that time Russia will decrease its imports tariff on new cars significantly from 30% in 2012 to 15% by 2019 as a result of joining the WTO) local production will also allow Fiat to support its dealership network, which is crucial to support its long term growth in Russia. ZIL also seems to be an interesting partner for Fiat in terms of LCV production. Favorable location, experience in commercial vehicle segment, high availability of unused production capacities and government support are the key factors which should make this cooperation successful and to strengthen Fiat’s position in a light commercial vehicle segment in Russia. Fiat’s international strategy is to boost sales outside domestic boundaries, to be less dependent from sluggish Italian and Central European markets and be able to exploit the expansion of BRIC countries, especially Russia. It is Fiat’s aim to heavily invest in the Jeep brand to reinforce his image in Europe, capitalising the international recognition and the expertise of the iconic brand in SUV and CUV model segments. Jeep already started the renewal of its range with the brand new Grand Cherokee, which is helping Fiat-Chrysler group to have higher margin sales in Premium SUV segment. The production in Russia will be a very good opportunity to extend Jeep sales internationally.It will also be possible for Fiat to complete the offering by launching a new low cost C-Sedan and new models to the current range of already successful LCV vehicles. Overall, both Fiat and the Russian automotive industry should be able to benefit from this cooperation, yet it will depend on Fiat’s strategy in the Russian market which is becoming really challenging as key global OEMs already set their foot in this lucrative market.Pietro Boggia and Vitaly Belskiy represent the Automotive & Transportation practice at Frost & Sullivan, global consultancy.
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