Economy In Gear

Why is Fiat Chrysler adding hundreds of dealerships in the US?

Fiat Chrysler Automobiles is reportedly planning a dramatic expansion of its dealer network. The question is why now?

2017 Chrysler Pacifica Hybrid.
PRNewsFoto/FCA US LLC/File
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The Fiat logo as seen on a car at the Paris Mondial de l'Automobile.
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Insiders report that Fiat Chrysler Automobiles is planning a dramatic expansion of its dealer network. If the rumors are correct, the company could add as many as 400 shops in the US – a 16 percent increase.

The question is: why now?

All in the timing

After the Great Recession, US auto sales collapsed. In 2009, dealers moved just 11.4 million vehicles, a 27-year low.

Since then, sales have improved significantly: last year, Americans bought 17,550,351 vehicles, and analysts believe that 2017 will see another uptick

The problem is, recent increases have been fairly small, and those in the future will likely be, too. For example, 2016 improved on 2015's numbers by fewer than 75,000 vehicles, resulting in a 0.4 percent gain. Next year's growth is likely to be on par with that, if not smaller.

So, it's fair to ask the question: why have Sergio Marchionne and his team waited so long to expand FCA's dealer network? If this were 2010, sure, it would make sense. But given the current pace of growth, it would seem that the U.S. auto market is pretty stable, with room for a handful of new FCA showrooms, but not nearly the 400 said to be in the works.

Even more confusing, the expansion seems out-of-whack with FCA's own sales numbers. In 2016, the automaker moved 2,211,057 vehicles, a 0.1 percent improvement. The gains came exclusively from truck and SUV sales which rose 9.3 percent. The company's car sales, on the other hand, were off 33.6 percent (which shouldn't come as any surprise, if you've been paying attention). 

If FCA is planning such a huge expansion of its dealer network, it's probably because the company believes there's room for even more truck and SUV sales – and it's true that Jeep and Ram sales have been strong in recent years.

But in a stable, modestly growing market like the US, FCA won't just need to boost capacity to justify a 16 percent expansion of its footprint; it'll need to steal market share from competitors.

FCA hasn't commented on the rumored expansion plans. We'll let you know if it does.

This story originally appeared on The Car Connection.

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