See below.
The claim is that Fiat Dealers will Lose money on every Fiat 500 they sell. Now, while the article makes sense on the surface, some things don't. All the dealers who got the franchise went out of their way to get it. These, presumably, are the top performers. And, I think I am on form ground here, they are not stupid. They must have carefully reviewed a business plan and took a calculated risk...and decided that in the long run this would pay off.
Thoughts?

http://www.autotrends.org/fiat-500-sales-are-2011s-mission-impossible/

Excerpt:

"Poking Holes in Fiat’s 500 Sales Plan
First, let’s assume that Fiat can overcome old memories about poor product quality. Next, let’s assume that the new 500 manages to capture North America’s attention in a way that the Fiesta, MINI, and Mazda2 can not.

The Fiat 500 is going to be an entry level car, which means consumers are going to expect discounting. According to a quick check of the MINI’s Edmunds.com True Market Value®, it looks like MINI dealers are managing to sell their cars for about $500 over invoice (with different models and markets being slightly higher). Keep in mind, these are premium vehicles being sold at BMW dealerships. If MINI can only get $500 over invoice, Fiat has their work cut out for them to hold a similar price.

For sake of argument, we’ll say that Fiat 500s sell for the same price. With dealer holdback (the additional money dealers get from manufacturers to pay for things like floor-plan financing, overhead, etc.) being about $450 per car (3% of invoice), dealers can realistically expect about $950 in gross profit on every new Fiat 500. According to the 2010 National Auto Dealers Association (NADA) State of the Industry report, the average low-volume auto dealer spends $661 on advertising for every new vehicle they sell.


As you might have guessed by now, selling 25 brand new Fiat 500s a month is the definition of “low volume.” A Fiat dealer is going to have to spend $660 dollars on advertising to turn around and earn about $950 in gross profits…and this doesn’t even begin to cover other overhead expenses, building and/or remodeling a new showroom studio, dedicated Fiat sales and customer service staff, etc."

Selling & marketing anything in the USA is vastly different to Europe and the list of successful, established European companies which have tried to break into the North American market and failed is long indeed.

The FIAT 500 is postured as a premium product in its niche in the European market (the Panda is the locost alternative). It may not be possible to achieve the same posturing in the USA. And selling a low volume niche market product at commodity prices is not a good basis for a sound business model.

We watch with interest from this side of the pond.

jrkitching said:

Selling & marketing anything in the USA is vastly different to Europe and the list of successful, established European companies which have tried to break into the North American market and failed is long indeed.

The FIAT 500 is postured as a premium product in its niche in the European market (the Panda is the locost alternative). It may not be possible to achieve the same posturing in the USA. And selling a low volume niche market product at commodity prices is not a good basis for a sound business model.

We watch with interest from this side of the pond.

Click to expand...

Yep, same as what I was going to say.

A lot will depend on whether the American market "gets" the 500 - and by that I mean whether it's perceived to be something a little bit different or not. If it's perceived to be a gimmick then it could be a bloodbath - let's hope not though!

If they "got" the Mini and Smart car (why i'll never know) they should get the 500 too. Without stereotyping, most Americans are very competitive, they express this by means of "Status" bigger is better, and they often put their EGO's before anything else, even if it's a good design.

Like when i go to the US, people with huge 7.0L trucks, black windows and 22" chrome wheels are envied, anyone stupid enough to drive around in anything that screams "look at me" in the UK gets laughed at!

I think they are slowly starting to appreciate that bigger isn't better in every instance, and that there are other priorities in life too.

Just my opinion, that's the way it comes across too me!

Look at things going the other way.

Cadillac are about to relaunch in Europe......................for the 5th time in 12 years.

Cheers

D

why does the dealer have to spend $660 dollars on advertising

surely the marketing is done by the importer?

looks like an article written by a jealous competitor

i read somewhere the prima edition had already sold out in canada

RobW said:

why does the dealer have to spend $660 dollars on advertising

surely the marketing is done by the importer?

looks like an article written by a jealous competitor

i read somewhere the prima edition had already sold out in canada

Click to expand...

Right. The dealers selling these cars are the ones who are super performers.
They have not done the math? This intrepid reporter figured out the "obvious" they did not?

sjmst said:

Right. The dealers selling these cars are the ones who are super performers.
They have not done the math? This intrepid reporter figured out the "obvious" they did not?

Click to expand...

perhaps the reporter should stick to writing fiction and leave the salesmen to sell

Fiat are doing an tv campaign so theres the advertising sorted

http://www.italiaspeed.com/2010/cars/fiat/11/500_us_video/2511_tv_advert.html

To my surprise the author responded:

"sjmst – Dealers certainly have done the math, and I’m confident that they’ll make money.

The point I didn’t make – the connection I guess I should have drawn – is that dealers will cut back on advertising and marketing expenses. Without advertising, the Fiat 500 isn’t going to sell. They have very little name recognition right now (I’d guess a lot of people don’t even know they’re selling cars in the USA), very little brand value, etc.

Finally, as to your point about service, you’re absolutely right. Assuming Fiat survives long-term, parts and service can be great sources of dealer profit…but that assumes that Fiat is a success, and that dealers are willing to wait 3-5 years to see a decent return.

The long and short of it goes like this: Fiat sales goals are impossible. They will be lucky to sell 30k units, and the reason is simple: There’s no money in these cars for dealers."

TO WHICH I RESPONDED:

sjmst says:
November 27, 2010 at 9:01 am
"Hi Jason. Thanks for your response. As I understand Fiat’s marketing plan, they will rely in part on non-traditional methods of advertising (e.g., social media). I had the chance to drive a euro spec 500 in the USA (imported by a British friend). The car drew lots of interest. So there is a chance mere word of mouth will factor in. Your article does make points worth considering, but I think it will take off. The 500′s may also draw traffic to the adjacent dealership, develop a “halo” effect for Chrysler products…including other Fiats and Fiat based platforms.
Now, IF these cars are not 100% bulletproof in the reliability dept there will be a problem."

sjmst said:

To my surprise the author responded:

"sjmst – Dealers certainly have done the math, and I’m confident that they’ll make money.

The point I didn’t make – the connection I guess I should have drawn – is that dealers will cut back on advertising and marketing expenses. Without advertising, the Fiat 500 isn’t going to sell. They have very little name recognition right now (I’d guess a lot of people don’t even know they’re selling cars in the USA), very little brand value, etc.

Finally, as to your point about service, you’re absolutely right. Assuming Fiat survives long-term, parts and service can be great sources of dealer profit…but that assumes that Fiat is a success, and that dealers are willing to wait 3-5 years to see a decent return.

The long and short of it goes like this: Fiat sales goals are impossible. They will be lucky to sell 30k units, and the reason is simple: There’s no money in these cars for dealers."

TO WHICH I RESPONDED:

sjmst says:
November 27, 2010 at 9:01 am
"Hi Jason. Thanks for your response. As I understand Fiat’s marketing plan, they will rely in part on non-traditional methods of advertising (e.g., social media). I had the chance to drive a euro spec 500 in the USA (imported by a British friend). The car drew lots of interest. So there is a chance mere word of mouth will factor in. Your article does make points worth considering, but I think it will take off. The 500′s may also draw traffic to the adjacent dealership, develop a “halo” effect for Chrysler products…including other Fiats and Fiat based platforms.
Now, IF these cars are not 100% bulletproof in the reliability dept there will be a problem."

Click to expand...

so the reporter changes his views as you have

Seems to me the reporters conclutions are based only on his assumption Fiat cant sell cars in the U.S.

RobW said:

so the reporter changes his views as you have

Click to expand...

I just expanded my view.

sjmst said:

The Fiat 500 is going to be an entry level car, which means consumers are going to expect discounting. According to a quick check of the MINI’s Edmunds.com True Market Value®, it looks like MINI dealers are managing to sell their cars for about $500 over invoice (with different models and markets being slightly higher). Keep in mind; these are premium vehicles being sold at BMW dealerships. If MINI can only get $500 over invoice, Fiat has their work cut out for them to hold a similar price.

Click to expand...

OK so the first point is the 500 is NOT an "entry" level vehicle. I have looked at the Honda Fit, Toyota Yaris, Ford Fiesta and others in the class. Value for dollar spent is way offer the top for the Fiat 500. I have Prima #241 on the way. I was at the launch party. I'm a gearhead since 1960 and have Porsches for a standard of Excellence (pun intended) to compare the 500. I'm impressed. If it drives as good as good as it appears it will win over the hearts and minds of the USA.

Remember the "Fix It Again Tony" cars left the USA 27 years ago. 40 something people do not have a point of reference. 50 something’s like myself that lusted after the red 124 Sport Spider when he graduated from High School still have a love for the Fiat 500.

I saw the first one on a trip to Italy in 2008. I told my wife if they ever come to the USA I would have one. Prima #241 will be mine soon.

Do I hope it is as good as I think it will be? You bet. Do I think Fiat can pull it off? You bet. Why? Fiat has a huge market share everywhere but the USA. Fiat can save Chrysler and Chrysler can help Fiat renter the USA market.

IMHO a match made in heaven.

777joee said:

OK so the first point is the 500 is NOT an "entry" level vehicle. I have looked at the Honda Fit, Toyota Yaris, Ford Fiesta and others in the class. Value for dollar spent is way offer the top for the Fiat 500. I have Prima #241 on the way. I was at the launch party. I'm a gearhead since 1960 and have Porsches for a standard of Excellence (pun intended) to compare the 500. I'm impressed. If it drives as good as good as it appears it will win over the hearts and minds of the USA.

Remember the "Fix It Again Tony" cars left the USA 27 years ago. 40 something people do not have a point of reference. 50 something’s like myself that lusted after the red 124 Sport Spider when he graduated from High School still have a love for the Fiat 500.

I saw the first one on a trip to Italy in 2008. I told my wife if they ever come to the USA I would have one. Prima #241 will be mine soon.

Do I hope it is as good as I think it will be? You bet. Do I think Fiat can pull it off? You bet. Why? Fiat has a huge market share everywhere but the USA. Fiat can save Chrysler and Chrysler can help Fiat renter the USA market.

IMHO a match made in heaven.

Click to expand...

I agree with you. BTW the way your post reads it looks like I was saying that nutty stuff...I was just quoting the article.

sjmst said:

I agree with you. BTW the way your post reads it looks like I was saying that nutty stuff...I was just quoting the article.

Click to expand...

Sorry I did not make it clear I was only responding to the article not you directly....

So you have #499? What color? Mine will be White.

Dave

777joee said:

Sorry I did not make it clear I was only responding to the article not you directly....

So you have #499? What color? Mine will be White.

Dave

Click to expand...

Hi Dave, I figured, didn't want anyone else to think I said that!

White will look great. I think the black stripe will be a good fit for it.

Mine is Russo, and I was wondering if I should have switched to white.
Too late now, but I'm sure I will love it!

Sam

As 777joee said, Fiat 500 is not "entry" level vehicle but "chic" car, and it has amazing success in Europe with young generation who cares about Louis Vuitton bags/shoes etc. Because... to be honest, this car is not ergonomic little car (big space, big boot...), it is as I said "chic" car (nice to be inside it, and other people to see you inside one... like MINI).
So in my opinion, the main advertising option for Fiat 500 to succeed in USA beside TV commercials and billboards is people to see ie Brad Pitt, Paris Hilton or Kardashian girls drive it.

Regarding color... I saw couple of days ago here in Athens one beautiful 500 in pearl color (it's like one giant pearl).