GENEVA (Reuters) - The Jeep Renegade, which debuted at the Geneva auto show on Tuesday, will be the first true test of the recent marriage between Italian carmaker Fiat and its U.S. unit Chrysler, meant to allow both to share technology, cash and dealer networks.
Fiat Chrysler Automobiles’ FIA.MI new small Jeep should help the carmaker reach an ambitious sales target of 1 million vehicles for the brand this year and will test the world’s seventh-largest auto group’s ability to compete globally.
Through the alliance, brands like Jeep hope to gain a global manufacturing footprint in Fiat’s home turf in Europe and in fast-growing markets such as Brazil, which has long been one of Fiat’s strongholds.
“The investment that Fiat has already made, now gives the opportunity to Jeep to expand its manufacturing footprint at lightning speed,” Mike Manley, head of the Jeep brand, said at the launch of the Renegade.
Even though analysts believe Jeep is the only truly global brand in FCA’s portfolio, they are cautious about the 1 million target, a 37 percent jump from 2013.
“Even though sales in Europe will grow, it won’t be easy to make huge volumes with Jeeps in the region because the market is very different from the U.S. one,” said Andrea Giuricin, head of TRA Consulting. “Asia is still a big blind spot for Fiat, and they need to rapidly grow their market share there to be able to maximize on the potential of the Jeep brand.”
The brand traces its roots to the iconic World War Two military vehicle and has had multiple owners over the past seven decades.
While the Wrangler and Grand Cherokee models are the best-selling Jeeps, it is through models like the Renegade that FCA hopes to expand the brand outside North America.
Manley said the small, entry-level Jeep is not only fuel efficient, but its compact size is better matched to narrower European roads than some other models in the brand’s family.
“This Jeep will enter a segment that’s estimated to grow to more than 2 million vehicles on a global basis by the end of 2015 and in Europe alone, sales of small SUVs will reach nearly 700,000 within a year,” he said.
The Jeep Renegade will be produced at the Melfi plant in southern Italy, making it the first Jeep built exclusively outside the United States. Sales in Europe are expected to start in the third quarter of this year and in the United States later in the year.
The small SUV retains many classic Jeep characteristics, with squared-off nose, boxy design and round headlights reflecting its Wrangler-derived DNA.
The Renegade will also be built in Brazil as of 2015, FCA Chief Executive Sergio Marchionne said. The carmaker plans to start making Jeeps in China the following year, hoping to tap fast-growing demand for sport utility vehicles in both markets.
The China plan, which is expected to add a Jeep to the plant Fiat runs with partner Guangzhou Automobile Group (601238.SS), is still conditional on government approvals.
At the Melfi plant, the Renegade will share underpinnings with the Fiat 500X, a crossover version of its popular 500 model that is expected to be unveiled later this year.
Both the Jeep and the Fiat 500X are part of FCA’s plan to turn around its ailing European operations by 2016, using idled Italian plants and creating jobs for thousands of workers who have been kept on temporary layoff arrangements for years.
FCA is investing 1 billion euros ($1.37 billion) to produce the new Jeep and a new 500 in Melfi. Investments and models planned for its other plants in Italy, including a relaunch of the sporty Alfa Romeo brand, will be presented in early May.
Unions at Melfi are hopeful brands like Jeep will create jobs and boost an economy struggling to recover from its longest postwar recession. But they are also worried what will happen if demand for the cars does not pick up as expected.
“There is no certainty over what share of the SUV market in Europe and elsewhere Fiat will be able to take, nor that they will manage to reinstate all the furloughed workers,” said Emanuele de Nicola, the FIOM union’s general secretary for the southern Basilicata region. “There are still too many questions.”
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Reporting by Agnieszka Flak; Editing by Dan Grebler