Fiat Looks to Apple and Google to Disrupt Car Industry
Established car manufacturers would be ill-advised to ignore the recent moves into the car market made by tech giants Apple and Google, according to Fiat's CEO, Sergio Marchionne.
Since Fiat took over Chrysler in a move orchestrated by Marchionne, the combined company has gone on to become one of the biggest car makers in the world, but the Fiat boss is wary of the plans of Apple and Google to create new products in the car industry. The Italian said that their move into electric and driverless cars could 'disrupt' the industry and create a whole new reality for the big car makers.
Marchionne was talking about the moves of Apple and Google as he attended the Geneva Motor Show. He admitted that change was good and shaking up the car industry could lead to benefits for the consumer, but he did add that it could be difficult for the companies whose business is being disrupted.
According to reports, Apple has created a team of several hundred people to work on its Titan car project. Indeed, the company has been taken to court by competitors who are angered by the firm's actions in allegedly poaching staff, offering them huge hikes in wages and generous signing-on bonuses or 'golden hellos'. Marchionne said that he would be happy to talk to Google or Apple about working together on a car project, and he admitted that Apple's vast cash pile would make it a serious competitor in any market. Being a little more bullish, however, he did add that Apple and Google should not underestimate the car companies' ability to adapt to retain their position at the top of the market.
In addition to the mass-market brands of Chrysler and Fiat, the combined company also owns the prestigious Alfa Romeo, Ferrari and Maserati marques. According to Marchionne, these brands provide some protection against the effects of market disruption and are key to the company's prospects of driving up profits into the future. The secret to the success of such brands is the desirability of the cars, which allows them to be sold at a premium. This is one thing that newcomers may find difficult to replicate.
Marchionne also used the opportunity of the Geneva Motor Show to claim that the recent recovery in the European car industry is gaining ground. Previously, Marchionne has been known to be one of the most pessimistic European car bosses, at one point saying that the European market was experiencing a bloodbath and was hell to operate in. Now, however, he appears to have softened his view and claimed that the European market is not as tough as it has been recently. He said that Fiat was not fighting 'tooth and nail' any more to protect every last sale, and he added that the fall in the euro exchange rate was boosting exports, while help from the European Central Bank was beginning to bear fruit. He did, however, warn of the danger to the market presented by the current conflict between Ukraine and Russia. He said that this could damage prospects for growth in the car industry and that these economic effects could move into Western European countries.
While Marchionne may be correct about the prestige car brands being insulated against market disruption by new entrants such as Apple and Google, this ignores the fact that the profits made by these brands have historically been very small when compared to the giant mass-market brands. It is the likes of Chrysler and Fiat that will make the bulk of profits for the big car companies, and it is exactly this market that is less concerned about brand and more focused on cost and economy. It may be, then, that Apple and Google will target these market sectors with their new cars in an effort to persuade more motorists to accept the new products.