Alfa Romeo is introducing its first all-new sedan for a decade. While the company is keeping a tight lid on the specifics of the vehicle, it laid out an ambitious plan for growth in May 2014. With the reveal of the Giulia, we will see the first real steps in executing the plan.
IHS Automotive perspective | |
Significance | Alfa Romeo is set to reveal an all-new D-segment sedan today (24 June), the Giulia, at an event celebrating the brand's heritage and meant to reintroduce Alfa Romeo to the world. |
Implications | Alfa Romeo's revival has long been promised, and includes a return to the US market. |
Outlook | Alfa Romeo has set a target for global sales of the brand of 400,000 units in 2018, with 150,000 of those in the US. While FCA's boss, Sergio Marchionne, is known for setting extremely ambitious goals and meeting many of them, the projections for Alfa's sales might be a miss. Even if they are a miss, however, if the brand achieves a stronger global presence and a foothold in the US by 2018, it may still be viewed as a successful re-launch of the brand. |
Alfa Romeo will reveal its new D-segment sedan, the Giulia, to the world later today (24 June). This will take place at the brand's museum at its historic Arese site in Milan (Italy). However, it has been one of the most secretive launches in history and there is little known about the car. The launch is part of a larger story for Alfa Romeo, a brand that is looking to find a new place in the automotive market.
While Alfa Romeo has not confirmed any details about the car yet, reports suggest it will be launched in its most sporting form first, the Quadrifoglio. This variant will compete with BMW's M3 and Mercedes' C63 and will be offered with rear-drive and a manual transmission only, according to Automotive News. Parent group Fiat Chrysler Automobiles (FCA) is counting on performance, along with Italian design, to stand out against the established luxury competitors. It has been suggested that the new sedan will feature a 510-hp twin-turbocharged V6 engine, derived from the Maserati Quattroporte and Ghibli unit, and built by fellow FCA company Ferrari. The new car is also reported to have a focus on sophisticated materials such aluminium and carbon fibre.
IHS Automotive will report on further vehicle details as they are confirmed.
Outlook and implications
FCA's strategic plan for Alfa Romeo was first unveiled in May 2014 and includes bringing eight vehicles to market by 2018. This is an extremely ambitious plan, particularly with a brand that has introduced only two new products during the past eight years. Alfa Romeo is looking to reclaim a place in the premium market that it has not owned for some time, if ever. FCA's CEO, Sergio Marchionne, has promised the Alfa Romeo line-up will meet or exceed anything from Audi, BMW, or Mercedes - a tall order, no doubt. Following on from the low-volume, niche 4C Coupe and Spider and the ageing MiTo and Giulietta in Europe, the brand needs a range to meet a much broader level of consumer needs and demands to become a viable contender.
Automakers are increasingly focused on the premium- and luxury-car segment in today's environment in an effort to increase offerings with high profit margins. FCA is looking for the Alfa Romeo and Maserati brands to improve margins, while mainstream Fiat, Chrysler, and Dodge brands provide volume and scale. There is also the opportunity to leverage Maserati and Alfa. In the longer-term strategy, it would best be supported by Alfa introducing technology that later filters through to the Italian and American brands.
Additionally, there is fierce competition, particularly in the United States, among Audi, BMW, Lexus, and Mercedes-Benz for bragging rights as the top-selling luxury brand. This competition, particularly at the German makers, is driving accelerated product cadences, downward pressure on prices and monthly payments, and increased emphasis on the retail experience. Alfa will attack the luxury market from a sporting perspective - one that is aligned with the brand's history and can generate enthusiasm. However, the highest-performing cars are not the highest-volume ones. To achieve high volumes, the brand will need to offer a product accessible to and aspirational for mainstream luxury buyers.
Alfa Romeo is also looking to establish a place among luxury brands when several other automakers are in the midst of similar offensives, each at different points in the process. Jaguar, Cadillac, Volvo, Infiniti, and Lincoln are all working to gain market share and volume, and to rebuild their brand images up to top-tier luxury status again. Alfa's story is nearly a common one, in today's market. There is also further pressure on the luxury segment from mainstream automakers offering higher technology and more premium trim levels, perhaps best exemplified by Ford's Platinum series of the F-150 and (soon) a similar model of the Explorer in the US and the Vignale in Europe.
Given these current trends in the US luxury market, Alfa Romeo's goal of sales of 400,000 units for the brand globally in 2018 - about twice the brand's sales in 2000 and six times the number sold in 2014 - and 150,000 US sales is ambitious. The Giulia will undoubtedly help Alfa significantly. The challenge - and the stakes - might be most significant in the US market, where the brand has almost no existing image in the eyes of American consumers and no exclusive retail network. The recent focus on a potential FCA merger with another automaker may also affect Alfa Romeo's future, though it impossible to predict the exact impact, particularly given that no merger partner is certain.
In view of the situation and market context, IHS Automotive does not forecast the brand will meet its self-set targets - though we do see expansion and for Alfa Romeo to gain ground and set the stage for a new position in the market over time. Brand rebuilding often can take 15 to 20 years, and there are no indications that Alfa Romeo has any advantage for short-circuiting the process.
Overall, we forecast the Giulia will see sales in the mid-40,000-units-per-annum range, once production is ramped up and the new sedan is available in all planned markets. In 2017-20, we forecast the Giulia will be Alfa's second-best selling vehicle, delivering about 22% of the brand's total global volume. We forecast Alfa Romeo's global sales to reach 215,000 units in 2018 - a notable step up from 68,000 units in 2014, but also short of the target, despite being supported by other forthcoming models including crossovers. Europe is expected to remain Alfa's largest market over the next five years, delivering about 64% of the brand's sales. Because of the company's efforts to expand into other markets, this is a decline from 85% in 2015. Largely because of the return to North America and the US market, Europe's volume share of Alfa's global sales will slip to 57% in 2020, while North American sales will account for 25% of the brand's global volume.