The $6 Billion Plan To Make Alfa Romeo A Leading Car Brand

Summary

  • Alfa Romeo is investing $6 billion in 8 new models between now and 2018.
  • These models will be sold globally, which will include 240 dealers in the US.
  • The first car in this new product offensive is a 4-door sedan to be unveiled this week.
  • The new generation of Alfa Romeos will be “scaled-down” Ferraris and Maseratis, some in SUV and sedan bodies.
  • Alfa Romeo will compete for the “premium sedan/SUV” market with a fresh take, hoping to sell to those bored with BMWs and Mercedes, among others.

Founded on June 24, 1910, Alfa Romeo is one of the world’s most legendary car brands. Enzo Ferrari got his start at Alfa Romeo, before spinning out on his own, and today both Alfa Romeo and Ferrari are owned by the same company — FCA (NYSE:FCAU).

Amid all the talk of FCA entering into long-shot merger conversations with GM (NYSE:GM), Sergio Marchionne has also made the imminent revival of the Alfa Romeo brand into one of the biggest gambles in automotive history.

Over the next 3.5 years, Alfa Romeo is scheduled to launch 8 new cars, starting on its 105th anniversary June 24. Alfa will grow from a small niche European brand that to some degree “lost its way” over the last 40+ years, to a broad-line global performance car brand.

This investment will cost FCA an estimated $6 billion, out of which $2 billion has already been spent, and consists of this plan:

  1. Put two top engineers from Ferrari in charge of engineering (happened a few years ago).
  2. Launch a BMW (OTCPK:BAMXY) 3-series-sized sedan on June 24, which will commence sales in the US in the first quarter of 2016.
  3. Launch a D-segment midsize SUV in 2016.
  4. Follow with launches of larger sedans and SUVs in late 2016 and 2017.
  5. Round out with additional offerings by 2018.
  6. Retire the Europe-only existing and lesser Alfa Romeos by 2018.

The goal of this plan is to reach 350,000 global sales in 2018, out of which 150,000 would be in the US.

The brand positioning of Alfa Romeo is something like this. First, you have to take a look at the 4C, which is Alfa’s only offering in the US today. It’s a 2-seat extreme sports car that starts at approximately $55,000.

Just look at it. It’s basically a baby Ferrari, with a four cylinder engine instead of eight cylinders. Only 2,500 per year are made; 1,000 shipped to North America, starting in the recent months.

The lightweight construction — under 2,500 lbs — is impressive, but let’s get real here: It’s the looks of this car that will sell it. Then imagine transposing this design onto a full line of sedans, SUVs and other body styles.

Alfa Romeo’s management team talks a lot about brand authenticity. This means that unlike what Ford did with Lincoln, and GM did with Cadillac, the buyers can’t be allowed to feel that it’s a “scaled up” cheaper offering from something like Fiat or Chrysler. Buyers would see through that kind of “badge engineering” in a New York minute.

Rather, it will be a scaled-down Ferrari and Maserati. Come to think of it, it’s a bit hard to explain how different it will be from Maserati. Here are two metrics:

  1. Maseratis look good, but not as good as the Alfa Romeo 4C. FCA feels that there is room for another take on an Italian premium performance car, other than Maserati.
  2. Price. Alfa Romeo’s first new premium sedan will start around $50,000, well above Fiat’s $32,000 high end, but below Maserati’s $71,000 starting point. There will be some overlap with Maserati, but Alfa Romeo will likely top around $85,000 base price for the other larger models launched 2016-2018.

Alfa Romeo believes its new model lineup 2016-2018 will appeal to people bored with cars such as BMW and Mercedes. As BMW and Mercedes cars can how be had for as little as around $33,000 in the US, the air of exclusivity has been reduced. When you put your key on the table at the bar, people don’t know if your car is $33,000 or $140,000, and it could be an eco-electric-something, not a macho performance car.

Furthermore, if you are looking for an almost self-driving car that puts you to sleep, Alfa Romeo will not be for you. An Alfa won’t be a computer that tries to boss you around, or take over driving functions anymore than a Ducati or Harley Davidson does.

What you are going to get with an Alfa Romeo are:

  1. Noise, and lots of it. The exhaust will sound like a World War Two air force fighter in pursuit. Very Italian. The only problem for Alfa Romeo is that Jaguar has already staked out some of this noisy exhaust market with the F-Type coupe and roadster.
  2. The Italian image, style and sophistication. This also ties into the cure for boredom. Let’s say you’re 50 years old and you’re on your third or fourth BMW or Mercedes. Time to grow up and get an Alfa Romeo!

Today, Alfa Romeo has 120 retailers in North America. 115 of them are also Fiat dealers. Over the next 3 years, this will grow to at least around 240. Some will be shared with Maserati and Ferrari; others will also include Fiat.

Stay tuned for this week’s reveal of the new chapter for Alfa Romeo. There may be a “Ferrari for the people” in your future.

Additional disclosure: At the time of submitting this article for publication, the author had no positions in the companies mentioned. However, positions can change at any time. Alfa Romeo paid for lodging and meals at a product launch event. Alfa Romeo provided a test car for review.