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Why Do Fiat Chrysler’s 1Q16 Sales Suggest Optimism?

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Fiat Chrysler Automobiles

Previously, we looked at the sales data of the top two US automakers, General Motors (GM) and Ford (F). The data show how cutting fleet sales has taken a toll on GM’s total US sales volume.

Fiat Chrysler Automobiles (FCAU) is another major auto company (XLY) that’s highly dependent on the US auto market. FCAU was formed in 2014 after the merger of Italian automaker Fiat SpA and American auto giant Chrysler. The company began trading on the NYSE on October 13, 2014. In this part of our series, we’ll look at Fiat Chrysler’s 1Q16 sales performance in the US market.

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Fiat Chrysler’s 1Q16 sales

In 1Q16, Fiat Chrysler’s total US sales increased 9% to reach ~0.55 million vehicles compared to ~0.50 million in 1Q15. Despite a significant decrease in small car sales, the company was able to achieve higher sales volume primarily due to increasing truck sales.

Achieving the right product mix

During the first quarter of 2016, FCAU sold nearly 98,000 cars with a significant year-over-year decline of 29%. Truck sales increased to an impressive 452,000 units from 367,000 units in 1Q15. This reflects a year-over-year truck sales growth of 23%.

As we saw earlier in this series, the margin on heavy vehicles such as trucks and sports utility vehicles generally remained higher than the margins on small cars. So this change in product mix can be seen as a positive indicator that may expand FCAU’s margins for the US market.

Importance of Jeep, Dodge, and Ram

Jeep, Dodge, and Ram are three key brands in Fiat Chrysler’s portfolio. Before the merger of Fiat and Chrysler, these brands were part of Chrysler. So you can see the significance of Fiat’s merger with Chrysler, especially at a time when the trend in US auto demand was leaning toward heavy and mid-sized trucks and utility vehicles.

Commenting on this shift in US auto sales, Reid Bigland, senior vice president – Sales, FCA – North America, said, “As consumers continue to shift their buying preference towards utility vehicles and trucks, they are walking directly into the FCA wheelhouse.”

Note that the world’s largest automaker, Toyota Motor (TM), has also been trying to strengthen its pickup truck and utility vehicle portfolio in the United States to benefit from this trend.

In the next part of our series, we’ll take a look at Tesla Motors (TSLA), a fairly new US automaker, and see how it’s doing in terms of delivery growth.

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