FCA-PSA merger: brand positioning will be one of the main challenges of the new group

A few hours away from the official announcement related to"Merger agreement between FCA and PSA, a news that yesterday has created an enormous media echo, anticipating a real revolution in the automotive sector with the birth of a maxi-group that has all the credentials to counter international market leaders such as Volkswagen and Toyota.

The merger process will be long and will last several weeks with different technical aspects that will be evaluated in the near future. Certainly, the merger between FCA and PSA will start immediate synergies for 3.7 billion euros a year without considering possible closures of plants and further optimization of production processes.

One of the main elements to consider for the future of the new group is represented by brand positioning. Joining in a single entity, FCA and PSA will bring together under one roof the Italian brands acquired over time by Fiat, the American brands of Chrysler and the brands of PSA which, in addition to the French brands, also brings with it the Opel and Vauxhall brands, from years two sides of the same coin, recently acquired by General Motors.

Identifying the right brand positioning will be one of the main tasks of the managers of the new group that, we remember, will have Carlos Tavares as new CEO that will have to create a management able to make the most of every single brand of the new company. The first fruits of the merger will arrive only in the coming years but already in the coming months the first significant indications on the future of the two groups' brands could start to arrive.

Alfa Romeo

The analysis of brand positioning cannot but start from Alfa Romeo that will continue to be offered as a premium brand but with a future linked to sales results in the next few years, as confirmed by Mike Manley during the day yesterday, on the sidelines of the presentation of the FCA results of the last quarter.

The new Alfa Romeo business plan covers the future of the brand from 2020 to 2022 confirming the reduction in investments, with the cancellation of projects such as the E-SUV and sports GTV and 8C, and the rationalization of the range, which will lead to the exit of the Alfa Romeo Giulietta that, at least for now, will not be replaced. The future of the Alfa Romeo range will be characterized by the restyling of Alfa Romeo Giulia and Stelvio and of the new SUVs of segment C (the standard version of the Tonale) and of segment B.

In fact, Alfa Romeo's "repositioning" began yesterday. For the next few years, the Italian brand will occupy the B, C and D segments with three SUVs that will have to guarantee sufficient sales to allow the brand to continue its history. As suggested by Manley, the success of the new products will allow a new future expansion of the range. The sporting soul of Alfa Romeo will be represented by the Alfa Romeo Giulia (the restyling will play a fundamental role also in this aspect).

The future group "FCA-PSA" could make changes during construction to the industrial plan, but it is clear that these changes will be linked to the way the Tonale, a key project for the re-launch of Alfa Romeo, will be received on the market. particularly in Europe. The B-SUV (a project to be discovered from a technical point of view) could represent an important push for growth or the last still of "salvation" for the brand.

On balance, then, for the next few years Alfa Romeo will continue to have a premium positioning but will focus on segments B, C and D rather than on segments C, D and E, going further to neglect the niche of the sports market. A necessary step backwards (according to the current FCA leadership) to make the Italian brand sustainable in the near future. We'll see if the "conservative" strategy devised by FCA under the direction of Manley will bear fruit and if the new management, after the merger, will make changes to the investments planned for Alfa.

Maserati

Maserati will be the symbol of the high end of the future group. The Trident brand will be clearly distinguished from Alfa Romeo with the only D-SUV (expected for 2021) that will occupy the same segment as the Stelvio but will be offered at a significantly higher price (following a pattern similar to that adopted by Volkswagen with Porsche and Audi SUVs).

The new Maserati business plan will allow the brand to occupy all the major segments of the luxury car market. In the yard there are the restyling of Ghibli, Levante and Quattroporte that will arrive in 2020 (subsequently there are the new generations of Levante and Quattroporte already confirmed), the aforementioned D-SUV, there new sports car which will be produced next year in Modena and the new generations of GranTurismo is GranCabrio (which will be electric).

The Maserati brand aims to strengthen its image of luxury brand, continuing to focus on important margins. The expansion of the range will inevitably lead to a growth in sales even if, unlike what happened in the past, FCA has not set specific sales targets for the Trident.

From the beginning of 2020, with the arrival of the first projects of the new industrial plan, Maserati will strengthen its market position with the aim of becoming a reference point also in sectors such as electrification and autonomous driving, elements that will characterize all the new Maseratis on the market.

European brands

The merger between FCA and PSA creates a veritable concentration of generalist brands, surpassing even the numbers of the Volkswagen group, which, potentially, will be able to share platforms and components but, at the same time, risk stamping each other's feet.

In Europe, Peugeot, Opel is Citroen they sell a lot (especially Peugeot and Opel which are the third and fourth brands in Europe for sales volumes) and share architectures, engines and components. Fiat could join the group with targeted projects in the segments in which it is stronger and with the possibility of developing the 500 sub-brand.

These synergies could guarantee important news also for the electric where PSA is ahead with the launch of the first zero-emission city cars (the Peugeot e-208 and the Opel Corsa-e) and FCA which is preparing to launch the new Fiat 500 Elettrica platform which will also be the basis of the Centoventi. The new group could have the right resources and brands to create a solid offer for the electricity market in Europe.

Fiat could make maximum use of synergies with the PSA brands by registering the arrival of new models (as expected it has already begun to talk about a new point). Most likely, in any case, the production of the new Fiat models (net of electrical projects based at Mirafiori) will move outside the Italian borders, taking advantage of the European PSA plants.

At the positioning level, Peugeot will continue to wink at the premium market (remaining below Alfa Romeo) while one of the other brands could be offered as a low cost brand with Fiat (with the exception of the 500 models) and Citroen, which are the main candidates for this role. Furthermore, the possibility of recording is not to be excluded different strategies on a geographical and regional basis with Fiat, Opel and Citroen that could be repositioned based on the importance of the respective brands in the various EMEA markets.

Everything to evaluate the future of Vauxhall (struggling with the problems of Brexit) while for Lancia it will indeed take a miracle to be able to record the arrival of a recovery plan and the construction of a range. The Italian brand, after the current Ypsilon, could leave the scene. Uncertain future also for DS, premium brand that in Europe sells less than Alfa Romeo using architecture and components of the generalist PSA brands. For Abarth, thanks to the increased synergies and record sales results of these years, there could (finally) be resources for an expansion of the range.

American brands

Jeep will continue to be the reference brand of the company in North America and will continue its growth process in other international markets. Jeep is the only true international brand of the future group and will continue its expansion in all the markets in which it is present. The range of the American brand is constantly growing and the "compact" models like Renegade and Compass could, with the new generations, use architectures in common with the "generalist" models of the company.

The high-end models of Jeep will continue to have their premium setting and are unlikely to have contact points with the PSA brands. The new generation of Jeep Grand Cherokee is being developed and will debut next year using the Giorgio platform, the same as Giulia and Stelvio, which could also be used for the new ones Dodge more sporting.

As for the other American brands, RAM will continue to produce its pick-ups for North America where sales volumes continue to be high while for Chrysler the future is all to be written. The American brand, if it does not find its place, could soon move towards market exit. It will be interesting to understand how the new group will try to exploit the possible synergies between FCA and PSA to support the evolution of American brands.

To date, however, PSA is completely absent from the North American market and could exploit the structures of FCA to try to introduce, in a concrete way, its brands (in particular Peugeot that Tavares, before the FCA agreement, planned to launch in 2023 ). It will be the task of the new management to evaluate the best options to be put in place to enhance, even outside Europe, the synergies between FCA and PSA.

FCA-PSA: the future in South America and Asia

Important synergies could also come for the South America, where Fiat will continue to play a role of reference and Peugeot and Citroen (which have a market share of 4% against 12% of Fiat alone) could achieve positive results by using FCA's facilities to renew the range. The new group will point to South American market leadership.

All to be evaluated, instead, those that will be the strategies for i Asian markets and, in particular, for the China (where PSA is experiencing considerable difficulties but has announced an ambitious growth plan with a target of 400,000 units sold to be reached in 2025). In this case, the factors involved will be different and the future is all to be written.