FCA will evaluate Italy investment following tax increases

16 January 2019

FCA will evaluate Italy investment following tax increases

16 January 2019

Fiat Chrysler Automobiles (FCA) is reviewing its investment plan for Italy following the Italian Government’s approval of taxes on large petrol and diesel cars.

CEO Mike Manley made the announcement at the Detroit motor show, suggesting that in light of the announcement, it would need to think again about the €5 billion it had originally announced it would invest in its operations at home.

‘It certainly means it needs to be reviewed again. It's being reviewed at this moment,’ Manley told journalists at the event. ‘Until that review is finished I can't comment any further.’

The Italian manufacturer’s plans were intended to deliver on a strategy outlined by the late boss Sergio Marchionne in June 2018, when he committed to keep converting plants in the country to build higher-margin Alfa Romeo, Jeep and Maserati models, together with hybrid and electric vehicles. He hoped this investment would help to protect both jobs and profits.

These brands all use larger engines, which emit more CO2 and so will be penalised following the recent revisions to the tax system. From 1 March 2019 onwards, all new cars registered that emit less than 90g/km CO2 will be eligible for a ‘bonus’ payment of up to €6,000 for the lowest polluting. Conversely, a financial penalty is levied on all cars emitting over 160g/km CO2, climbing from €1,100 to €2,500. The new tax rate will not apply to all internal combustion engine (ICE) cars, however, as small family cars will be exempt.

FCA sees the system as unfair and believes it pushes buyers towards smaller vehicles. Aside from the focus on the group's premium brands, this also comes at a time when it wants to move more into the SUV market with larger versions of its 500 model range.

US issues

Manley also discussed the impact of steel tariffs imposed by US President Donald Trump, stating it would add between €260 million and €310 million in extra costs during 2019.

He also added that the partial US shutdown, over the costs for Trump’s border wall, has delayed final certification of one of FCA’s heavy-duty pickup trucks. With this segment one of the most popular in the US, the delay could cost the company in its attempt to take market share from General Motors and Ford.

‘I am concerned. Very concerned,’ Manley said. ‘If it [the shutdown] continues it will have an impact on the launch of the heavy duty. The earlier it can be resolved, clearly the better,’ Manley said.