Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Fiat Chrysler Spent Millions Introducing Alfa Romeo To Americans
Fiat Chrysler has high hopes for its Alfa Romeo brand, with plans to sell 150,000 cars per year by 2018 in the U.S. after two decades away. To fulfill this tall order, the Italian luxury brand is going to need to score some conquest sales from people who normally buy German luxury cars like BMWs and Audis.
The problem is, Alfa—despite the stellar 4C and Giulia—hasn’t really establish itself in the U.S. market, in part because it’s a relative newcomer. Americans mostly remember the old Spider if they know anything about the brand at all. To fix that, Fiat Chrysler, hoping to turn “Alfa Romeo” into a household name, dropped some serious coin on an ad in this year’s Super Bowl. How much coin? A lot, as The Detroit News reports:
The ads are expensive, with a 30-second ad in the 2016 game costing companies an average of $4.8 million, doubling in a decade, Kantar Media said. The average cost for a 30-second ad in this year’s game could top $5 million, according to estimates.
The news site goes on, saying Fiat Chrysler is typically a big spender when it comes to Super Bowl ads:
Fiat Chrysler’s ad spending last year tied for second place with PepsiCo Inc. at $19.2 million, Kantar Media said. In 2015, it spent $30.8 million, tying with Anheuser-Busch InBev.
Yes, that’s a lot of money for 30 seconds of air time, but Alfa Romeo is going to need as much exposure as it can get if it wants to go up against the big dogs.
2nd Gear: How Hyundai Shot Its Emotional Commercial During The Game
Speaking of Super Bowl ads, Hyundai showed an emotional clip last night, bringing U.S. army soldiers to the big game virtually in a commercial the brand had to shoot during the game—quite a complex feat. Here’s how Automotive News said they pulled it off:
Adding to the spot’s complexity, the agency had to shoot a portion of it, edit and then get it approved during the game to blend the reactions into the 90-second documentary-style ad. It aired during the first commercial break after the game.
For “Operation Better,” Hyundai and its agency Innocean deployed a technology that the team can’t compare to anything else. Going beyond virtual reality, the Hyundai crew visually transported three soldiers to Houston’s NRG Stadium using 360-degree pods that placed them in a suite with their family members attending the game.
The soldiers in the commercial, deployed to a base in Zagan, Poland, sat in a room surrounded by a large screen, which let them view the suite and field as if they were actually there. The news site says their families could see them through a screen, which was held up by a teddy bear sitting in the suite at the big game.
Good guys, Hyundai.
3rd Gear: Toyota Is Worried About U.S. Protectionism
Bloomberg reports that Toyota’s full-year forecasts didn’t meet analysts’ estimates, in part because of potential trade tensions with the U.S. under President Trump’s potentially protectionist policies. The news wire cites Trump’s statements about the auto manufacturer’s decision to build a Corolla plant in Mexico, and the fact that Toyota imports millions of cars to the U.S., while the U.S. imports very few cars back to Japan (for reasons we’ve described here), as indicators of potential friction between the current administration and the automotive juggernaut.
Toyota’s managing officer told the site in a briefing:
It’s difficult to give any impact forecast from Trump’s administration at this point...Toyota will cooperate with its group as it watches the moves from Trump’s administration.
Bloomberg reports that, based on a report from an analyst at Jeffries Group, things could get dicey for automakers, saying:
Japanese carmakers face a “significantly greater risk” from frictions over the trade imbalance with the U.S. than from revisions to the North American Free Trade Agreement with Mexico and Canada,
I think, at this point, nobody really knows what’s going to happen.
4th Gear: Dealers Aren’t Happy About Fiat Chrysler’s Dealer Expansion Plans
In an effort increase market share, Fiat Chrysler is trying to expand its dealer network to the tune of 380 new dealerships. Some of the company’s existing 2,500 dealers, though, are not thrilled with the move, as the dealerships could cut into their sales, with Automotive News saying:
Some have complained to state authorities, two citing a proposed FCA store in the New Orleans suburb of Kenner, La., that would be built on a vacant lot hemmed in by a massive swamp on one side and Lake Pontchartrain on another. The problem, local dealers say, is that three existing FCA stores are situated near the accessible sides of the planned Lakeshore of Kenner dealership. One is less than 5 miles away.
The news site cites an “insider” as saying FCA’s dealership location consultant, Urban Science, has recommended against expanding the dealership network, but Fiat Chrysler is pushing ahead anyhow.
Automotive News spoke with dealers, who said many of the new locations will be in New Orleans, Houston and in a number of other metro areas throughout the country.
This is tough for nearby dealerships, whose sales could be squeezed even further by the competition. And those dealers aren’t doing so hot as it is, as the news site says:
...dealer profitability has been squeezed after FCA last fall reworked its controversial stair-step incentives, known as the Volume Growth Program. The change dramatically cut incentive payments to retailers who meet aggressive sales goals. That move and others did help FCA boost its North American profit margin from 6.4 percent in 2015 to 7.4 percent in 2016, the highest it has been since the company emerged from bankruptcy in 2009.
It went on, saying dealers have been hurt by Fiat Chrysler’s “thinner product lineup,” as the company cranks up its transition from cars to the SUVS and trucks America loves.
5th Gear: Geely’s “Lynk & CO.” Wants A Direct-Sales Model
Meanwhile, some companies are forgeoing the dealership model entirely. Chinese automaker Geely is going to let Lynk & Co., the car-sharing “smartphone on wheels” brand, sell straight to consumers, Automotive News reports.
The idea here, the news site quotes Alain Visser, senior vice president of the brand, as saying, is that the dealer model has stagnated, and could “lead to a widening gap between winners and losers.” He went on:
For me, it was very clear: If it was going to be doing the same thing that everybody else does, but a little bit better, I’m not interested at all...That’s boring. My strong belief was, and still is, if you create a new car brand, do things differently. That doesn’t mean everything that’s been done over the last 100 years is wrong, but I think there’s room for something else.
Of course, this isn’t exactly a new concept. Tesla’s been pushing the direct-to-consumer model since the beginning. But hey, being like Tesla isn’t a bad thing.
Charles Sykes was an artist and sculptor, who painted motoring scenes for John Montagu and R-R Ltd and in 1910 was selected by Johnson to sculpt a mascot suitable for Rolls-Royce motorcars. He made them for R-R from February 6th, 1911 until his daughter took over manufacture in 1928.
Neutral: Will Alfa Romeo be able to catch up to BMW and Audi? What do you think it will take for them to pull that off?