Now that Fiat Chrysler Automobiles and Peugeot S.A. have officially merged into Stellantis, creating the world’s fourth largest automaker the fate of some of the low volume brands under the new super group have come into focus. From the Fiat Chrysler side of the family, those brands have primarily included Fiat, Chrysler, Alfa Romeo, and Maserati, all of which have struggled with sales in North America. Chrysler, a true American heritage brand, is now down to a line-up of two models, including the 300 which only sold 16,653 units in 2020, while the European brands have struggled to gain much traction in the region since coming back to the United States in 2010 and 2013 for Fiat and Alfa Romeo, respectively.
All Fiat models in the United States combined for lowly total of 4,300 units sold in 2020. Granted the automotive market, across almost every brand, has been negatively impacted immensely in multiple ways in 2020 due to the COVID-19 pandemic. Alfa Romeo, however, held their pace quite well for the year. Unit sales grew 2% in the United States for the year, buoyed by a 9% increase in Stelvio sales. The 4C though, in its final year swan song, failed to break 100 units sold. It’s understandable why the brand is stepping away from such a low volume, niche sports car, rather focusing on the development of the Tonale. The hybrid subcompact crossover will slot into the line-up between the Guilia and the Stelvio. For Alfa Romeo, the Stelvio is proving with the right car, in the right segment, consumers can be won over.
A SECOND CHANCE
It would be a shame to see any of these brands lose their place in the future of automotive history. Fortunately, the CEO of Stellantis, Carlos Tavares, has committed to the revival of these brands rather than laying them to rest. They will all be given a proper chance to succeed under Stellantis. However, the pressure to provide meaningful returns to shareholders increases as the industry spotlight is held closer on these merged super groups. Expectations are high that the merger will produce operational and administrative synergies that will slash costs across the company.
This is what puts Alfa Romeo’s involvement in Formula 1 in focus. Alfa Romeo’s title sponsorship agreement with the Sauber Group, which has created Alfa Romeo Formula 1 Racing, is set to expire at the end of 2021. Actually, the original agreement, which started in 2018, ended in 2020, but was renewed just for 2021 back in October of 2020. At the time, given the upcoming merger into Stellantis and the uncertainty around the COVID-19 pandemic’s effects on Formula 1, only committing to a one year extension is a logical move, but still a worrying sign of Alfa Romeo’s long term commitment.
The title sponsorship is estimated to be valued at $20 to 30 million a year. Sauber is definitely hoping the partnership continues. In 2017, prior to the title agreement with Alfa Romeo, Sauber finished last (10th) in the Formula 1 Constructors Championship with a severe lack of sponsorship revenue. The title agreement brought a much needed boost in revenue to the team while Frederic Vasseur’s work as Team Principal helped propel the team up to 8th in the Constructors Championship the past couple of years since. So while Sauber is happy to have a title sponsor in Alfa Romeo, will Stellantis be as enthused to provide the money?
MARKETING A BRAND
Most notably are the market exposure opportunities in Formula 1 for an automotive brand. Alfa Romeo has struggled to gain traction in major markets outside of Europe, especially in China, the world’s largest automotive market. With the upcoming launch of the Tonale, Alfa Romeo’s response to the red hot subcompact crossover market and the brand’s best opportunity at a high sales volume model, exposure to US and China markets will be critical to propelling the brands growth. China and the United States are key markets and mainstays in the Formula 1 calendar for Liberty Media as well given the growth opportunity for the sport in these countries.
Regardless of the race weekend, each race on Formula 1’s 23-race calendar provides an opportunity to reach a growing global audience. The race weekends held in China and the United States then provide a platform, with an already energized audience and press, for promotional events focused on the model lineup. Alfa Romeo also has the team, its drivers, and Formula 1’s digital media presence at its disposal to further promotion. A video published in October 2020 by Formula 1, featuring Alfa Romeo drivers, Kimi Raikkonen and Antonio Giovanni, taking a Giulia Quadrifoglio around the Nordschleife while interviewing each other, has amassed over 2 million views on Youtube. Kimi Raikkonen, with his 2 million social media followers, has also been used directly in a variety of Alfa Romeo promotions with the Stelvio.
While the 4C says goodbye, the Giulia GTA, a wild, 540 horsepower, track ready variant of the Giulia, will have no problem serving as the brand’s motorsport inspired halo car. Just as any halo car though, this special edition isn’t produced for sales volume, it’s all about brand promotion. The success of these special variants will be measured by buzz in automotive magazines, television shows, YouTube videos, and the like. Given Alfa Romeo’s illustrious history in Grand Prix racing, dating back to the 1930’s, Formula 1 serves as the perfect back drop for the brand to highlight its position on the automotive world with the GTA.
The title sponsorship with Sauber also provides a valuable technical partnership for Alfa Romeo. Sauber has already provided significant technical input on the advanced aerodynamics of the Giulia GTA and GTAm by extensively testing the car in the same state-of-the-art wind tunnel as the Formula 1 cars. Sauber Engineering, a division of Sauber, then produced the carbon aero components, such as the new front bumper and adjustable front splitter, the side skirts, the diffuser, and rear wings, for the new models.
Neither variant will utilize any electric hybrid powertrains, as of now, but given the growing surge of EV technology in performance cars, it should only be a matter of time before Alfa Romeo follows suit. The Tonale will begin to introduce a hybrid powertrain into Alfa Romeo’s lineup at an economical level. The partnership with Sauber though, utilizing their experience with the turbo hybrid motors of Formula 1, would undoubtedly help Alfa take the technology to a performance leading level. However, Stellanis will have Peugeot competing with a V6 turbocharged hybrid in the LeMans Hypercar class in 2023. This program would likely provide the technology development to be implemented on road cars throughout the family of brands.
VALUE ON DISPLAY IN 2021
While the lackluster results in the Formula 1 Constructors Championship don’t live up to the ambitions and image of the Alfa Romeo brand, an improved Ferrari engine and the new Concorde Agreement, which will aim to balance the competitiveness and profitability of the field through a budget cap, for 2021 provides an exciting opportunity for the team to improve in the coming years. Improved results provides improved coverage during the race broadcast and in consequent media. For the $20 million annual price on the title agreement, there is a lot of value in Alfa Romeo maintaining its presence in Formula 1. Increasing their brand exposure and solidifying their brand image of a luxury, motorsport rooted automaker will be critical in position the company for growth. Stellantis will be watching closely this year.