The Italian market has now
completed six months of freefalling sales, and another year of downturn is virtually
certain. Full year 1998 finished higher than all early predictions had indicated, but
everyone is agreed that was merely putting off the inevitable, and a full year 1999 of no
more than 2 million units is widely predicted. On the basis that the average demand level
in Italy is just about 2 million, we would not disagree and in fact that is the figure
that we predicted at the beginning of last year.

Fiat has two major worries. Firstly they
rely on Italy for 60% of their European sales, and secondly they are losing faster in
Italy than anybody else.

It is difficult to see
where Fiat will be able to gain any relief in 1999, at least until the new Punto arrives,
and that probably won’t make its full impact until next year. The timing has gone all
wrong for them with regard to new product launchings.

The Seicento should have
provided a reasonable boost when it was launched earlier last year, but firstly it was too
upmarket for some of Fiat’s traditional buyers (we can’t comment concerning
value for money or driving characteristics because we have been unable to get a drive in
the car), but even so, since Seicento appeared the Basic Sector has been inundated with
new arrivals. Most important in the sector, probably, are the new Volkswagen Lupo (which
will be the car to beat) but we also saw the arrival of the Smart, which might now be
attracting adverse publicity but which arrived with a bigger bang than expected. Add to
those the fact that Toyota has just shown the Yaris and has massive intent for that model,
plus late in 1998 there were seven other new models launched into the sector, all some
time after the Seicento. If that isn’t bad enough, next year will see the unveiling
of Basic Sector models from both Peugeot and GM Opel, and Seicento isn’t due for
replacement until 2004.

The Small Sector is the one
area of hope for Fiat (unless they find outlets for the Palio range. Punto is due in its
new form during 1999 and the only other challengers during this current year that are
expected are the new Daihatsu Charade, Suzuki Cultus, but more significantly the Audi A2.
However, the Renault Clio, launched last year, is doing very well and the sparkling new
Peugeot 206 can’t be built fast enough. On the other hand the Ford Fiesta replacement
is not due until 2001 and the GM Opel Corsa replacement should arrive in 2000.

The Lower Medium Sector is
another major problem area for Fiat. The Bravo/Brava are not due for replacement until
2001, but in the meantime competitors in that sector will launch or have just recently
launched twelve new models for the car buying public to scrap over.

The Fiat management
isn’t stupid and they now have a new man at the helm who has already stated that 1999
is going to be a difficult year. It would appear that it is likely to be one of damage
limitation until the big guns can be brought to bear on target once again.