Can Fiat Still Compete Even Though Marchionne Is Late To The Party?

JUL 6 2018 BY CARLO OMBELLO 24

Marchionne is last to join the EV bandwagon, but can Fiat still compete? (Part 1)

Fiat Chrysler’s CEO Sergio Marchionne unveiled his last 5-year industrial plan for the Italian-American carmaker a month ago in Turin, Italy. The much-anticipated event did not disappoint, as the CEO – now 14 years into his reign at the helm of FCA – confirmed the company would be finally rid of its long-standing debt in a matter of weeks (the debt stood at €4.58 billion in 2016). More importantly, in a major U-turn from past statements, Marchionne announced a major investment of 9 billion euros aimed at the electrification of Fiat Chrysler models to the detriment of diesel engines – to be abandoned by 2021 -, finally bowing to the technological revolution that is changing the face of the global car industry at ever faster pace.

*This article originally appeared on opportunity:energy. Author Carlo Ombello graciously shared it with InsideEVs.

Fiat’s financial wizard made it his life mission to close out the company’s debts and reach profitability. He succeeded by adopting a very lean industrial approach, maximising profits based on existing technologies and minimising investments in Research & Development, while also capitalising on spin-offs of the best brands (see Ferrari). All of this made Sergio Marchionne the Wall Street analysts’ darling and helped Fiat quadruple its shares’ value since 2014. But can Sergio’s financial genius survive the capital-intensive tech race to Car 2.0, also known as the electric car? Let’s rewind just a little.

Marchionne Vs The Future

Marchionne has been for years one of the most outspoken critics of EVs, to the point of inviting potential American customers of his Fiat 500e compliance car not to buy one as he’d lose $14,000 on each unit sold. But the irony goes on: as recently as last October, his acceptance speech for an ad honorem degree in Industrial Engineering at Italy’s Trento University focused entirely on innovation and technological changes in the industry. What did he say? Brace for it:

“At FCA we’re working on all kinds of electric cars: from 48-volt light hybrids to traditional hybrids, plug-ins and totally electric systems. But we can’t ignore some important elements. Let’s take, for example, the electric 500. […] We introduced it five years ago […], truth is, for each 500e we sell in the US we lose about 20,000 dollars. An operation that, if carried out on a large scale, becomes an extremely masochistic act. But the limits on electric technology are not just about cost, range, charging […]. Globally, two-thirds of electricity derive from fossil sources, coal […] accounts for about 40%. […] The emissions of an electric car, if the energy is sourced from fossil fuels, are at best equivalent to those of a gasoline car.”

The story about EV costs is Marchionne’s favourite (and apparently he loses more money now than before!). He should perhaps take notes from his competitors, such as VW-Audi Group, which is seemingly sourcing batteries at around €100 per kWh for its upcoming EVs. As to CO2 emissions’ figures, Sergio’s statement can be easily dismissed by checking real-world energy mix data, as shown for instance in a European think tank’s study. Even in coal-intensive countries such as Poland and Germany (Europe’s worst!), EVs’ life-cycle emissions will be much less than for a conventional car. A neat chart exemplifies it clearly below, no scorched Earth in sight.

But let’s keep listening to Marchionne’s 18th century’s lesson from October 2017:

We have to be realistic. Electric cars may look like a technological marvel, above all to reduce emission levels in urban centres, but they are a double-edged sword. Forcing the introduction of electric [powertrains] on a global scale, without first solving the problem of how to produce energy from clean and renewable sources, represents a threat to our planet’s very existence. The electric [transition] is an operation that needs to be carried out without legal impositions, while continuing to exploit and integrate the benefits of other available technologies. It’s certainly more useful to focus on improving traditional engines and work on increasing the use of alternative fuels, especially methane, which in terms of origin and quality is currently the most virtuous, and the cleanest in terms of emissions.

Sounds like the words of a true visionary. Can someone please inform Mr. Marchionne about the ongoing renewable energy revolution he is apparently unaware of? Also, do update the CEO on fracking when he talks of methane “virtues”. But wait, enough with his thoughts from eight months ago. Things have changed. Fast forward to now.

[Stay tuned for Part 2]

Source: opportunity:energy

Categories: Chrysler, Fiat

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24 Comments on "Can Fiat Still Compete Even Though Marchionne Is Late To The Party?"

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Ricardo

Can we please stop saying this or that company is late? For the love of God. Evs are selling by the hundreds in most countries on earth. No one is late yet. There’s a lot of time for anyone or any company that decides they want a piece of this market. You are deluding yourselves.

Gasbag

“Can we please stop saying this or that company is late? ”

No. We’re going to hit the knee of the S curve from 2021-2023. That may be “plenty” of time in your mind but car manufacturers have 5-10 year design cycles . Consequently any company that is still on the fence in 2018 is officially late.

xm

Tesla has already hit the S curve of probable demand for the Model 3 at 1.2 to 1.8 million.

Yes, if Fiat is losing 20,000 dollars/euro’s on the 500e, in 2018? Than he should be FIRED.
And Methane: WOW. Another Loser.
He’s still going to with the JOKE that he can convince people to buy the Terrorist Loving Hydrogen BOMB on wheels.

Fiat needs NEW Management.

And this is extremely telling.
He let the cat out of the bag. He referred to Hydrogen cars and the Methane “solution”.
And methane cars are a solution to NOTHING, as it’s a POTENT Green House Gas.
It solves No Social or Environmental problem.

Carlo Ombello

Hi Ricardo, it may seem that way but development doesn’t come overnight in this industry. Also, among all automakers very few are as late to the party as FCA. Nonetheless, wait for part 2 of my article! 😉

Cheers

earl colby pottinger

Sorry, remember the concept of mind-share. If you wait too long then people will forget about your products and concentrate on ones they see around them being used.

Electric cars had that problem and still does in that people not using them worry about range. In just a few years when most people have seen or driven an electric car the worries will be gone, but people will often buy what they know works for others around them. So a late starter has the problem that people rather buy when their neighbors have.

Sustainable2020

You are very wrong. Tesla will have 70% or greater new bev market share in the states starting next year with their ever increasing production of the model 3 and future models.
All other bev builders selling in the USA are still limiting their production and markets for bevs….Tesla has none of those restrictions.
Tesla will easily build three times or more as many bevs as all other bev builders combined selling in the states for at least the next 7 years.
FCA will be still selling on,y a few thousand bevs a year in the USA during that time.

G2

It’s never too late to make a good decision.

Clive

Him retiring is the best decision he can make.

G2

Bingo Clive!

Magnus H

It’s a bit telling that quoting the article in a comment, requires to “await moderation”…

Steven Loveday

Fixed for those that might be offended.

David Murray

Well, It’s ironic that a car that looses, now, erm, $20,000 is actually one of the best deals on the used car market. You can get a Fiat 500e for under $10,000 these days that is still under warranty. In some places they are even cheaper than that. I bought one for $7,500 last year. Yes, it isn’t a perfect EV, but It’s impossible to find anything to complain about at that price. This is especially true when you consider the only other EV you can buy used for a similar price is a used Nissan Leaf with a good amount of battery degradation. A used 500e at least has thermal management and will still do close to the original rated range.

Sustainable2020

Your comment about one of the only few thousand 500e models in the states is irrelevant to the article and the discussions of the future of fiat. 500e is pure n simple a low volume compliance car with no imorovements at all this decade…horrible.

David Gould

Chevy Spark EV goes for about that too.

ffbj

Boilerplate. It gets so tedious when suspect conclusions reached years ago, continue to haunt the proliferation of the ev.
A simpler way to say it would be that Sergio should join the club of has been auto execs like Bob Lutz, and just sit on their rockers, as they are off theirs, talking about how evs will never take off, as evs silently wiz by the old fogies home, in huge numbers.

xm

It may take a generation for the screwballs to die off, or these companies go bankrupt first.

EVShopper

I don’t understand what that chart graph is trying to communicate.

EVShopper

The diesel column is listed in CO2 per km, but what I assume to be the electric vehicle columns are CO2 per kWh. And how is their “well-to-tank” in an EV? Or are we assuming that it they mean from electrical energy generation (inlcuding getting whatever sources like coal, gas, oil, sun, wind, H2O, or nuclear) to the battery?

Carlo Ombello

Hi EVShopper,

It’s pretty simple. Bars are in grams of CO2 per km over the whole life cycle of cars, while the figures under each bar are, for the diesel on left, the simple tailpipe emissions per km, and for the other bars the equivalent grams of CO2 caused by an EV per kWh of electricity sourced while driving in that specific country, which is close to an equivalent of tailpipe emissions.

The main point lies in the bars, as they consider both the type of energy used while driving and the energy used at the factory during the manufacturing process.

antrik

Yes, well-to-tank for EVs is the CO2 produced on average for charging the battery from the respective national grids.

Lou Grinzo

I detest the “EVs are dirty because electricity is dirty” argument, for a very simple reason: Our electricity supply must get and is getting much cleaner. To get anywhere near where we need to be in terms of CO2 emissions, in the US, we have no choice but to attack transportation and electricity generation emissions. So even if not a single additional EV were put on the road in the US, we would still have to dramatically clean up our power sector.

A related issue is that while the above process happens, the EVs already on the road will automagically get incrementally cleaner, with the drivers not only doing nothing different, but not even knowing it happened.

Mint

What’s more is why should we be looking at the existing electricity mix, with plants built ages ago that would exist even if EVs died today?

EVs add electricity demand, and to meet that demand we’ll need new generation. New generation is far cleaner than existing generation, which is typically natural gas, wind, or solar.

arne-nl

“Forcing the introduction of electric [powertrains] on a global scale, without first solving the problem of how to produce energy from clean and renewable sources”

Replacing the entire fleet of ICE cars by EV’s is an undertaking that takes decades. If you start only after the transition to renewables, you’ll be unnecessarily burning fossil fuels for a long time. No, now is the perfect time to start for both projects to be complete roughly mid-century.

These are simply the words of an old man who can’t keep up with the world anymore and wants it to slow down.

antrik

I don’t agree with the last sentence. The article makes it pretty clear that his stance is strategic: he made FCA profitable by cutting R&D costs — so any innovation requiring new R&D is a problem for him…