How Fiat overcame internal crisis and reached market leadership in Brazil

RIO DE JANEIRO, BRAZIL – This moment could not be better for Fiat: market leader and the best-selling light vehicle of the year. In fact, the new Strada pickup was a watershed for the company, but the recovery plan went beyond this.

“Three years ago, people would have called me crazy if I had foreseen this result,” says Herlander Zola, director of the brand in South America and of commercial operations in Brazil.

Firstly, the manufacturer’s crisis comes from long before, when it lost the leadership to the Chevrolet Onix. It was the end of the reign that had lasted 11 years and that remained distant from the Italians for half a decade. Until now. In the first four months, Fiat secured 21% of sales in Brazil, followed by VW (17.1%) and GM (14.5%).

“We came from a period in which the brand suffered a lot in terms of share due to the growth of SUVs. We had no launches in this segment. Our novelties came from 2016, but in other segments. And, throughout this time, we did a deep work to understand what were the weaknesses in product, brand, and try to define a repositioning plan.”

In the first investment round, the manufacturer launched Mobi in 2016, followed by Argo and Cronos in the following years. In the second phase, the new Strada (presented last year, at the first peak of the pandemic) and Toro arrived. And three more are confirmed: the Progetto 363, the company’s first SUV here, revealed in the middle of the BBB finale; in addition to the electric 500e and another larger SUV.

“This movement involved the plans established in 2018 and led us to invest more in pickups and in products that would increase the average ticket. That’s why we will launch two SUVs. We were also very much guided by the cost reduction of our entire portfolio, identifying ways for the products to become increasingly more competitive, more complete, and more technological.”

To fulfill the repositioning strategy, Fiat created more complete options, such as the adventurous Trekking and the S-Design line. There were changes beyond the vehicles: the entire visual identity was changed – even the previous logo was retired. Fiat revived the stylized Italian flag to recall the European origin, and even adopted a new architectural pattern for the dealership network.

“This rebranding project is going strong and, today, we have about 520 dealerships throughout the country, 50 of which have already been completely renovated. And, by the end of this year, another 250 should receive renovations, because 100 of them are already in the process right now. Our expectation is to finish everything by next year. Interestingly, most of the planning took place during the pandemic.”

In less than three years, Fiat started with a 13.2% share in the Brazilian market and reached the top of the best-sellers table, with a 7 p.p. advance in relation to the end of 2018. To have an idea, the increase is higher than Toyota’s share, fifth in light vehicles, which totaled 7% in the period between January and April. According to the brand, it was the largest recovery in the sector since 2005.

“We were all betting internally, with a much more optimistic outlook than some of the main rivals. We knew that all our work [of redesigning] could yield important results and lead to a prominent position. Even during such a challenging period, as this pandemic has been, we kept all the investments that were planned for the Brazilian market.”

To guarantee production, a little bit of everything goes: look for new suppliers; bring in parts with airplanes; advance the assembly line of less equipped versions – and that demand fewer scarce items -; pay more for the components; and bet on good volume planning. According to Zola, the market moment is opportune for companies that have product availability.

“I say without fear of error that leadership is the fruit of work and planning. And not luck. The problems that the competitors had, we also had: semiconductors and steel are also in shortage here. This is a reality that affects the industry as a whole. But the Strada took the lead for the first time in September, when Onix production in Gravataí (RS) was not paralyzed.”

And if the result has been good for the Italians, a detail may worry at first glance: analyzing Fiat’s five best-selling vehicles, the Argo has more than half of retail sales – with the Uno, for example, direct sales represent more than 96% of the 10,042 registrations this year. Also surprising is the volume for Strada (77%), Mobi (50.3%) and Toro (50.1%).

“The dynamics of direct sales is very much shaped by two variables. The first involves pickups, which have a natural vocation for negotiation with legal entities, as light commercials in general. And 45% of our volume is from this segment. Another factor is the rental companies, which continue to grow, either by app demand or by direct rental. We find a healthy point for this operation to flow.”

According to the director of Fiat in South America and of commercial operations in the country, dealers view the current commercial strategy positively and have guaranteed good profitability during the pandemic. In the current scenario, with the change in the rules for purchasing vehicles with PCD exemptions – which are included in the direct sales account – about 60% of all sales occur in this modality.

“In our case, I would say that we have a very healthy relationship with both sales channels and, today, the network sees Fiat as a favorable business. We have gone through complicated moments in the past, with our dealers in financial difficulties, but now we have good financial results, even compared to some of our competitors. Years ago we even had 80% of direct sales.”

Theoretically, selling to legal entities would place the manufacturer as a rival of the dealer itself. But considering the current pandemic, this logic has been reversed: even if the commission is lower, the costs have also been reduced, since there are no expenses with stock in the operation. Considering the uncertainties of the economy, getting rid of the risk of stranded cars is a good idea.

“We have no prediction of what might happen with the inventory. At the beginning of the pandemic, the problem was different, because our network had vehicles available, only the demand was zero. And that inventory would have to be paid off at some point. With a good balance of the service dynamics, using inventory in an intelligent way so as not to burden it, our dealers can make a lot of money.”

In fact, the size of the dealer network has remained virtually stable in recent months, with no major variations (whether for better or worse). To provide assistance during the initial periods of the pandemic, payment terms were extended. But this period also yielded changes for the long term, such as the creation of a marketplace within the manufacturer’s own website.

“This new tool allows us to advertise specific units available in stock, with the specific details of chassis, color, and options, for example. And it has generated a more effective conversion rate than we had before. Because of the growth, the network is making more money now. We are based on volume, and even though the market has gone down, our revenue has increased.”

In Herlander Zola’s – and Fiat’s own – forecast, the automotive sector should close this year with 2.4 million vehicle registrations, which means a worsening in relation to the estimates from before the pandemic, but is considered positive in relation to what was projected in mid-2020. Thus, the plan is to continue fighting for the leadership in sales, even with the recovery of rivals.

“We have our feet on the ground and we know that our results are also influenced by competitors, especially Chevrolet, which lost share due to the lack of components. And of course, at the moment that everything is regularized, they will have more participation. But I have great confidence in our project, in the planned launches and in the success of the cars that are already available.”

Such expectation for the future is precisely because two of the main bets confirmed to reach the stores by the beginning of 2022 will be in the SUV category, which this year represented 38.4% of all car sales. It is worth noting that, currently, the company does not offer any option to compete in the competitive (and very heated) SUV segment in Brazil.

“I have no doubt that leadership is a consequence and not the end. Our entire strategy is focused on the health of the operation. And we have been investing to ensure an increasingly competitive position, which provides more volume and better profitability. Our plan foresees a profitable and solid performance. And if we fight for leadership, the better, as long as we offer satisfaction to customers and shareholders.”

Source: Exame