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Fiat Australia claims it has been steadily increasing the price of the base 500 Pop over the past 12 months because its previous bargain-basement (and heavily subsidised) $14k entry price was making the rest of the 500 range too expensive by comparison.
The Italian company in essence ‘re-launched’ here in June 2013 after having consolidated its official, rather than outsourced, distributorship. In an attempt to bolster its flagging brand recognition, it went in hard with the eyebrow-raising $14k driveaway pricing.
As a result, sales of the 500 shot up (as did Fiat’s sister Alfa Romeo models when they got their own price sharpening early last year for the same reason), with the 500 swiftly becoming one of the top-selling micro cars on the market.
However, the $14k driveaway pricing was also only achievable (and viable, from a financial perspective) through Fiat Chrysler Australia subsidising the campaign. Crucially, other 500 variants did not get driveaway pricing, which it says confused customers.
As a result, the company says, customers who may have been interested in a 500S or 500 Lounge simply could not justify going past the (less profitable) $14k Pop. It had to find a way to lure more buyers into the more premium versions, which had been “diluted” by the bargain-basement Pop.
And so it upped the Pop to $15k driveaway at the start of the year, then $16,500, and finally to $17k at the start of this month. The comparable price creep for the other variants has been less pronounced, though still evident.
In May last year the 500 Sport cost $16,900 plus on-road costs, whereas now costs $20k driveaway. Once on-road taxes and charges are factored in, these prices are almost the same. In May last year the Lounge cost $20,300 plus on-roads, and is not $23k driveaway, again, similar figures if calculated comparably.
Now to the obvious question: why not cut the price of the rest of the range instead of increasing the price of the Pop?
Because it had to subsidise the base price, Fiat Chrysler Australia appears to have decided to simply increase that one figure — slowly, to soften the blow— rather than taking the costlier decision to cut the pricing of the Sport/S and Lounge variants to bring them closer to the Pop.
The company evidently figured the $14k entry price had done its job and generated publicity, and with that task done, Fiat embarked on the price creep. And because the 500 is sold on style, the brand is confident customers will accept it, though admits the proof will be in the pudding.
On a side note, it is worth noting that Australia was one of the rare markets globally where the $16.5k Panda (at launch, cut to $14,500 subsequently) and $16k driveaway (again, at launch, though you’ll get one for $14.5k at the moment) Punto were positioned above the 500, so the company has argued that with the recent round of increases the ‘natural order’ has only been restored.
“We started it at $14k last year and the whole point was to say Fiat was accessible,” Fiat Chrysler director of product strategy Zac Loo told us this week.
“We noticed that the constant feedback was that customers struggled that only the Pop was incentivised. We were only focusing on Pop with driveaway pricing and if you walked into a dealer it didn’t make sense, because we’d put so much focus only on the Pop.
“We think the 500 has built nameplate recognition, it’s one of Fiat’s main drivers, we’ve kind of alway been playing catch up trying to get cars for customers, but overall time will tell how it plays out.
“It’s still a value packed car… there are other good cars in the segment but from a design perspective it’s the choice you’d go with.
“The Lounge is the sweet spot for us (for the product planning team) but when you looked at it and thought if I was a customer going into the showroom how were we setting it up to give people that opportunity?”
Site: Caradvice
