Fiat’s new Tipo is one of the most intriguing new car projects for some years. And that’s because it is trying to overturn conventional marketing wisdom in the most competitive segment of Europe’s cut-throat mainstream car market.
Instead of selling ever-plusher cars in an attempt to improve the brand’s value and trying to convince punters to pay higher prices for mainstream models, the Tipo project is an attempt to build a decent car at a sensible price and turn a decent profit.
Since the arrival in 1999 of the Golf Mk4 (known for its interior and exterior build quality) and the first Ford Focus (known for its exceptional driving dynamics), cars in this sector have become ever more upmarket.
The problem - which few in the industry ever talk about openly - is that what the average punter or fleet manager is willing to pay for a modern C-segment car is not enough to make a decent profit on such models.
Although car makers never break out the figures - not even to City analysts - most cars in this sector do well to break even from European sales.
Refreshingly different, cost-effective premium SUV is a credible, if not...
Indeed, one analyst friend of mine said that he thought most of the slim profits (if any) for mainstream European car makers came from the £500 supplement for metallic paint. Don’t laugh. Ten years ago even £250 for the optional CD changer was an important part of the economics of selling a sub-£18,000 car.
The struggle to make mainstream cars pay is a three-fold problem. Firstly, anything built in the European Union is relatively expensive because the hourly cost of labour is - globally speaking - quite high. Secondly, if the car has also been engineered in Europe, the engineering costs are also elevated by western European wages. Thirdly, car makers are engaged in a battle to make their cars ever more refined and well-specified. And that costs money.
This is all very well, but if the average European buyer can’t - or won’t - pay list price for a mass-market car, then the business case just doesn’t add up.
When I suggested to the boss of a European manufacturer that his cars were just too well specified he said: "Not at all. My customers want even more." Well, yes, and who can blame them if they get all that car for hardly more than it cost to produce?
Citroën was probably the first brand to break ranks on this content race with the C4 Cactus. By using an existing platform and simplifying the car’s construction it has got the entry-level 75bhp model down to a base showroom price of £13,000, before any haggling.
And while Ford does offer a base, 85bhp Focus at £14,000 (surely the definitive loss-leader), the cheapest regular Focus kicks of at £17,000.
The new Fiat Tipo saloon (the hatchback arrives later in 2016) is an attempt to slide into a gap between the back-to-basics Cactus and the plush Focus with a car that doesn’t feel too basic or by devoid of the kit that European buyers expect on a new vehicle.
The 4.5m-long saloon version of the car has just gone on sale in Italy, at a launch price of just £9000 for the 95bhp 1.4-litre petrol version. That price, however, is part of an ‘Opening Edition’ scrappage deal, where you bring in your old car to trade against the new Tipo.
According to the latest exchange rates, this entry-level Tipo will cost around £10,500 after the scrappage offer ends in a couple of months' time. The standard spec includes automatic climate control, six airbags, bluetooth, 16in alloys and fog lights.
A more upmarket Tipo equipped with a 1.6-litre turbodiesel engine will cost £12,000 including scrappage and £13,500 otherwise. The Opening Edition spec on this model adds sat-nav, cruise, rear camera and 17in alloys.
The new Fiat is being heavily advertised in Italy and, as the new TV ad shows, the campaign’s pitch is that you can ‘live like a millionaire’. Or, at least, drive a well-specced car for less.
Fiat has been able to offer sensible showroom prices because the Tipo was both engineered and is built in Turkey. This has kept the overall development costs much lower than if the car had been engineered and built in western Europe.
Assuming that these prices are preserved when the car comes to the UK (which isn’t the safest of bets, admittedly) and the Tipo is decently competitive to drive, this could be a car that finally breaks the 15-year mould of mainstream makers trying to sell ever more sophisticated and complex cars that will never achieve the sort of transaction prices to make them solidly profitable.
Then again the popularity of buying cars through cheap monthly PCP deals and the expectation of big discounts for private buyers could ensure that the new car buyers prefer to continue getting rather more car for their money, even if it is ultimately at the expense of many mainstream carmakers being able to make a return on their investments.