Stellantis Merger: How Fiat Should ‘Absorb’ Peugeot and Citröen Cars in Brazil

RIO DE JANEIRO, BRAZIL – Overall, the strong subjugate the weak, whether in a fight or in the market. And the outlook for the 2019 Stellantis merger between FCA and PSA should be the same, despite the friendly tone in the initial address by the new CEO, Carlos Tavares. Consultants, market sources and dealerships were heard in order to understand what should happen to the Stellantis brands in Brazil.

With a large share of the Brazilian market, a large-scale dealership network and a solid brand, Fiat is the one that should be leading activities here, says a sector executive. “Unlike what will occur in other markets, where PSA brands are better positioned, here Fiat will deal the cards,” said an industry executive

FENABRAVE (National Federation of Automotive Vehicles Distribution) data confirm this information.

In 2020, an atypical year because of the pandemic, Fiat closed in third place with 16.5% of market share. Peugeot and Citroën came 13th and 14th respectively, with less than 1%, but after including the Jeep brand, FCA ranked 8th in Brazil with a market share of 5.6%.

PSA will become an FCA “division” in Brazil

Fiat dealerships will adopt the same strategy with Peugeot and Citroën brands as some have with Jeep, particularly in inland cities. They will create a “space” within the dealership to expand sales points and try to leverage the penetration of the French brands. “Dealerships will be reimbursed for investments that will need to be made”, says an executive who agreed to comment on condition of anonymity.

Asked if French brands will be discontinued in Brazil, he disagrees. “Ford has recently shown that abandoning the operation is too costly. Stellantis will have to figure out what to do with so many plants, but it can’t close the plant in Porto Real (RJ) because it was created with tax incentives.” In addition to Porto Real, there are FCA plants in Betim (MG), Goiana (PE) and Campo Largo (PR).

On condition of anonymity, an internal source says that the changes are already happening. Among them is that senior executives are already packed to either return or be expatriated to France. PSA’s management teams will be incorporated into the FCA corporate building in São Paulo and the after-sales will also be integrated by the Italian brand teams.

“Rebadge” should not happen, but commercials are the exception

Both people in the industry and consultants say that Stellantis should not focus on rebadging (changing the brand logo without changing the car), or from FCA to PSA products or vice-versa. Fiat already had an unsuccessful experience with this when it sold the Dodge Journey as the Fiat Freemont. Apart from the non-standard value of the brand’s cars, it changed the V6 engine for a four-cylinder one, which resulted in a lower performance than expected.

Stellantis will revisit an old partnership. PSA and Fiat have already worked with a joint-venture in Brazil up to 2016. At the Iveco plant in Sete Lagoas (MG), the Jumper and Boxer vans from Citroën and Peugeot, were in fact the Fiat Ducato with a new symbol. Now the logic should be reversed.

PSA’s commercial line is more complete than Fiat’s. In addition to the above mentioned vans, imported from Italy, there are smaller models, such as the Jumpy and the Expert, which are produced in Uruguay. And, this time, Fiat should offer the French vans line with its logo, benefiting from its larger network and the distribution of the Fiorino and the Doblò Cargo consumer.

FCA could rebuild PSA customer’s confidence

As much as everything seems to lead to FCA swallowing PSA in Brazil within Stellantis, ADK Automotive consultant Paulo Roberto Garbossa sees positive opportunities as well. “The confidence that Brazilians in general have in Fiat and now also in Jeep could lead them to perceive Peugeot and Citroën positively,” he says.

Garbossa adds that Fiat’s better structured after-sales service and Brazilian consumer expertise on points that PSA sometimes fails to address may serve as a boost. “Customers will think: if I buy a Peugeot I can be serviced or look for what I need at a Fiat dealership. This provides greater security to customers,” he adds.

The consultant’s observation is consistent with the information provided by another source that Fiat dealerships should make room for PSA models, particularly in areas where resale of French brands are not available. This type of synergy could help both sales, after-sales and also the turnover of the model when used in the market.

Garbossa uses a recent example from national market: “Look at what happened with the Chery when it started to be sold as the Caoa Chery. The same products, if they had come only with the Chinese brand, wouldn’t have enjoyed the same reliability and receptivity in the market as they gained in this second phase.”

According to FENABRAVE data, the Caoa Chery closed 2020 with a 1% market share and a ranking two positions ahead of Peugeot and three ahead of Citroën.

Source: UOL