FCA to achieve significant increase in profits for 2016 with high margin SUVs

Globalizing Jeep vehicles; producing more SUVs and pickups in North America

2016/12/16

Summary

Five-year business plan for 2014-2018

  In January 2016, the FCA Group updated its "Business Plan for 2014-2018" that it released in May 2014. As the plan has progressed faster than expected, the company raised its financial targets for 2018 in spite of the fact it spun-off Ferrari. FCA's financial results for 2016 are expected to improve with strong sales of Jeep brand SUVs and recovery in the European market. Its net revenues for 2016 are projected to increase by 1.3% year-over-year (y/y) to EUR 112 billion and adjusted earnings before interest and tax (EBIT) is expected to grow 21% to EUR 5.8 billion. However, its global unit sales are failing to climb due to a stagnant economy in Latin America and lower demand for passenger cars in North America. Most analysts for the automotive industry are of the opinion that it would be difficult for FCA to achieve its five-year plan sales volume target of seven million units for 2018.

Globalization of Jeep brand vehicles

  One of the strategic initiatives outlined in the five-year business plan is to globalize Jeep brand vehicles. Jeep unit sales for the period January-September 2016 grew 11% y/y owing to increased production in North America and the start of local production in Brazil and China. FCA raised the Jeep volume target for 2018 to two million units.

Expansion of unit sales for the Alfa Romeo brand

  FCA intends to expand unit sales of the Alfa Romeo brand vehicles as it launched the Giulia midsize sedan in 2016 and is expected to release its first SUV, the Stelvio, in 2017. Nevertheless, the brand's launches of the other models will be put off for about two years due to China's tough market conditions and reduced R&D investment.

Increasing production of SUVs and pickups at North American plants

  In the North American market, demand for SUVs and pickups is growing with lower gasoline prices. FCA will end production of the Dodge Dart and Chrysler 200 passenger cars at its North American plants by the end of 2016, and manufacture more Jeep SUVs and Ram pickups to meet shifts in demand. The automaker is seeking a partner to build the passenger cars that will go out of production.

Collaboration with Google to develop self-driving cars

  In May 2016, FCA and Google announced that they will collaborate to develop self-driving cars. They will integrate Google's self-driving system into the 2017 Chrysler Pacifica PHV minivan. The engineering teams from both companies will work together to design, test and manufacture the self-driving Pacifica.

Related Reports:

Fiat Chrysler's new five-year plan: Sales target of 7 million units by 2018 (Jun. 2014)
FCA: numerous features to add convenience and assist driving on Pacifica (Aug . 2016)