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Fiat Chrysler plans a major ramp-up of production for its two best-selling brands, Jeep and Ram, by adding a new assembly plant in Detroit as part of a $4.5 billion investment program announced last week.
The automaker also announced its most significant commitment yet to adding electric vehicles to its lineup, starting with at least four new Jeep plug-in hybrids. That's a significant move for the automaker. Former CEO Sergio Marchionne was so skeptical of battery powertrain technology that he once asked potential customers not to buy its first all-electric model, the Fiat 500e, because the company expected to lose more than $10,000 on every vehicle it sold.
The likelihood is that it will be difficult to make money, even with the new electric models Fiat Chrysler is planning. Between regulators and the competition, the company has no choice, industry analysts say. The challenge will be to come up with battery-based models that can turn on consumers even when gas is cheap.
As part of last week's announcement, Fiat Chrysler CEO Mike Manley said the investments will allow the carmaker to pursue new opportunities, "including at least four plug-in hybrid vehicles and the flexibility to produce fully battery-electric vehicles."
That part of the announcement wasn't entirely unexpected. While the late Marchionne, Manley's predecessor, was clearly a battery-car skeptic, he had come to accept that Fiat Chrysler would have to follow the lead of its competitors — as well as the push from regulators for more energy efficient cars, especially in key markets like the U.S., Europe and China. During the company's investor day event last June, Marchionne revealed plans for a number of new battery-based models. These include high-end "halo" vehicles such as the planned Alfa Romeo 8C, a plug-in hybrid supercar.
But the new announcement "gives more clarity to what they've previously said," according to Sam Abuelsamid, a senior analyst with research firm Navigant.
For one thing, Manley is making it clear that Fiat Chrysler will design future products to use a broad range of powertrains, from gas and diesel engines to mild, "conventional" and plug-in hybrids, as well as pure battery-electric drivetrains.
"Basically, every (future) Jeep they build will have a plug-in hybrid option," said Abuelsamid, "and they're designing them to accommodate full electric, as well."
Marchionne's attention last year seemed focused on China, now the world's largest market for plug-based vehicles. Driving that surge is the so-called new energy vehicle rule enacted in late 2017. It provides significant incentives to manufacturers and consumers to build and buy plug models.
But last week's news suggests that Fiat Chrysler is now starting to see more opportunities in the U.S., as well as other markets. If nothing else, said Abuelsamid, it has recognized that the competition will be driving the push to electrify as much as regulators.
Ford, for example, revealed plans in January to build an all-electric version of its F-150, the best-selling competitor to Fiat Chrysler's Ram 1500. And General Motors is considering all-electric versions of its Chevrolet Silverado and GMC Sierra pickups. A number of mainstream competitors are also working up plug-in hybrid and all-electric SUVs.
At the high end, meanwhile, BMW has developed a new "architecture," or platform, that will underpin virtually all future models, including sedans, coupes and SUVs that can accommodate all possible types of engines.
"As they move Jeep up-market, in order to stay competitive in that segment, they need, at the least, plug-in hybrids and there's increasing likelihood they'll need battery-electric versions, too," said Abuelsamid.
The challenge will be to come up with battery drive systems that can appeal to Jeep and Ram buyers, some of the market's most traditional customers. But both of those Fiat Chrysler brands have shown it can be done, said Stephanie Brinley, principle auto analyst with IHS Markit, with the latest versions of the Jeep Wrangler and Ram 1500.
They are offered with optional "mild" hybrid drivetrains using small battery-electric assist technology to not only improve fuel economy but also to boost performance and enhance on- and off-road driving capabilities.
With future models, "They could come to market with products that are differentiated from what (other) companies are offering by enhancing the capabilities" of Jeep and Ram models.
Perhaps the bigger challenge, however, will be finding a way to turn a profit on future electrified models. While Tesla managed to claw into the black during the last half of 2018, CEO Elon Musk warned of a probable loss during the first quarter and automakers have traditionally gone into the red — often, deeply into the red — with their battery-based models.
The equation has been improving, Manley said, as battery costs tumble. Even so, he cautioned that Fiat Chrysler expects it can recover only 60 percent of the incremental cost for electrified powertrain technology. Buyers simply aren't willing to pay a premium.
That's why the automaker is expected to continue playing things cautiously as it decides just how fast to roll out the new electrified powertrain options it is developing.