27 October 2015

Mature Market Vehicle Production : Italy

The 127 model, when Fiat made desirable, fun cars

Italy is known for design and flair. It has injected these qualities into its cars, well most of the time. No one always gets it right. Looking at the Italian car industry is a lesson in how to do things and and how not do them as well.

As Europe picked itself up from the horrendous events of mid-century, car making was soon a major part of the recovery. As the standard of living improved, so did car sales. Italy had a strong level of protection initially and the roads were soon swarming with Italian made vehicles.

Import duties went with time and more brands were seen on the roads. This didn't hurt the Italian car making so much as an inflexible working conditions creating inefficiency and later some poor cars that came along. Fiat lost market share in Europe and capacity soon exceeded demand. New models were eventually made elsewhere, not at home.

Fiat still has sizable production volume but not much of it in Italy anymore as just mentioned. From 1989 to 2013 Italian car production (excluding CVs) dropped every year almost without exception. 2014 saw a slight improvement and that only because of Jeep. Jeep should help car production increase in 2015 and beyond.

We can see in the list below how the problem has been cars and not so much CV production, which has been more stable. It now accounts for over 40% of the total.

Year Vehicle Car CV % CV

1950 128,000 101,000 27,000 21.1%

1955 269,000 231,000 38,000 14.1%

1960 645,000 596,000 49,000 7.6%

1965 1,176,000 1,104,000 72,000 6.1%

1970 1,854,000 1,720,000 134,000 7.2%

1975 1,459,000 1,349,000 110,000 7.5%

1980 1,610,000 1,445,000 165,000 10.2%

1985 1,573,000 1,389,000 184,000 11.7%

1990 2,121,000 1,875,000 246,000 11.6%

1995 1,667,000 1,422,000 245,000 14.7%

2000 1,738,000 1,422,000 316,000 18.2%

2005 1,041,000 726,000 315,000 30.3%

2010 838,000 573,000 265,000 31.6%

2014 698,000 401,000 297,000 42.6%

Summary: When a car maker decided to make cars elsewhere and not at home, you know something is wrong. The failure to address that has been costly in the long run. Short term pain leads to long term gain but if you refuse to bite the bullet, then it only makes things worse in the long run. Italy seems a classic case of that failure. 

Picture credit: Martin Šimon

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