Fiat S.p.A. and Chrysler Have an Electric-Car Problem

Is the newly merged automaker falling far behind in the green-car race?

May 27, 2014 at 6:32PM

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Don't buy one of these, Fiat's CEO says. The company loses $14,000 on every electric Fiat 500e, according to CEO Sergio Marchionne. Source: Fiat Chrysler.

Fiat Chrysler Automobiles (NASDAQOTH:FIATY) CEO Sergio Marchionne really doesn't want to sell you an electric car.

Speaking at a conference in Washington last week, Marchionne said of the new electric Fiat 500e, "I hope you don't buy it because every time I sell one it costs me $14,000," according to a Reuters report

The new Fiat 500e starts at $32,650, nearly double the starting price of the gas-powered Fiat 500. Fiat isn't selling very many, but it would sell even fewer if the vehicle were priced to give the automaker a profit. 

FCA is selling electric cars in the U.S. because state and federal regulations strongly encourage it to do so -- not because it advocates the technology.

And that points to a larger problem for FCA as it aspires to be a major global player: Where are its successful green vehicles?  

Where are Fiat Chrysler's hybrids?
The Chrysler half of the newly merged automaker certainly isn't known for fuel-efficient offerings. 

While the company does have some products to brag about -- a new diesel version of its Ram 1500 pickup gets an EPA-rated 28 miles per gallon on the highway -- it's better known for popular Jeep SUVs and thundering Hemi-powered Dodge muscle cars.

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The new supercharged Dodge Challenger SRT Hellcat is a cool product, but it won't help Fiat Chrysler's corporate average fuel economy calculations. Source: Fiat Chrysler.

Fiat is known for its small cars in other parts of the world. But only the Fiat 500 family has come to the U.S. so far, and sales here have been modest.

More to the point, FCA has not put a big bet behind alternative propulsion technologies. Toyota (NYSE:TM) and Ford (NYSE:F) have strong-selling hybrids, General Motors (NYSE:GM) has the Chevy Volt plug-in, and Nissan (NASDAQOTH:NSANY) has the popular electric Leaf. In fact, most of the big automakers you can name are making big bets on methods for powering vehicles that go beyond gasoline and diesel engines.

So where are Fiat Chrysler's hybrids?

A big plan that is short on green-car options
FCA revealed its five-year plan earlier this month. Overall, the plan is short on green-car technologies. But there are some hybrids on the way.

Its five-year plan for the Chrysler brand includes plug-in hybrid versions of the next-generation Town & Country minivan (due in 2016) and a full-sized crossover SUV (due in 2017).

The new Town & Country will likely be America's first plug-in minivan. That's significant. But it's still two years away, and meanwhile Chrysler has nothing like Toyota's Prius or Ford's Fusion Hybrid, an everyday hybrid vehicle that sells in large numbers.

This could be a problem. It's not just a matter of lost sales. It's a matter of being ready for the future: Fuel-economy standards in the U.S. (and elsewhere) are set to sharply tighten over the next several years

Most automakers take that seriously. And it's not just about electric cars and hybrids: Ford is making its all-new pickups out of aluminum, a radical, high-profile move to increase the fuel economy of its most important product line. 

Marchionne has said the next-generation Jeep Wrangler will be lighter and more fuel-efficient. But the company isn't making the kinds of big technological bets seen at most of its rivals. 

Will that haunt FCA in a few years?

FCA has made a lot of small gains, but others have made big leaps
To its credit, FCA is making incremental gains with its technology. New eight-speed and nine-speed transmissions are increasing the fuel economy of its existing engines. 

Other technical tricks, such as all-wheel-drive systems that disconnect the drivetrain from the rear axle when it isn't needed, help eke out incremental gains, especially in highway driving. 

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Chrysler's all-new 200 sedan includes a lot of small fuel-saving touches. Source: Fiat Chrysler.

Those tricks add up: The new Chrysler 200 gets an EPA-rated 23 mpg in the city and 36 on the highway with its 2.4-liter, four-cylinder engine, which compares well with the rival Ford Fusion's 22 and 34 mpg, respectively.

But of course the hybrid Fusion is EPA-rated at 47 mpg, highway and city, and FCA has nothing that can compete.

Marchionne may not be worried about competing with the Fusion Hybrid right now -- it's reasonable to argue that FCA has other, more urgent product priorities.  

But he should be worried about meeting the same fuel-economy rules that Ford is working so hard to meet. What will FCA do to catch up? We don't know yet, and that should have investors concerned.

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John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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