Fiat and Volkswagen diverge on the fate of the Brazilian low-cost car
After years of fierce rivalry, the Palio was discontinued and the Gol will be repositioned. What can happen to the regional market category they helped establish?
Australians enjoy pickups based on full-size sedans, the English adore sporty hatchbacks, the French have a penchant for subversive design… Many brands and car models have been created specifically to respect those differences between users around the world. Unfortunately, manufacturers aren’t fond of that because they’re forced to develop and update multiple models for every market segment. The aforementioned Palio and Gol are two examples of that.
The hatchback category became famous over the past few decades in Latin America, particularly in Brazil, for concentrating the three biggest requirements of the local average buyer: they can be roomy enough for a small family, somewhat sporty, and fairly cheap at once. They hardly excel at any of those, but what actually mattered is that balance. Since people from most other countries seek those attributes in separate cars, companies had to adapt to the Brazilian taste.
From the 1980s to the 2000s, the automotive market of that region was heavily dominated by that type of car. The Volkswagen Gol became the best-selling car in Brazil starting in 1987 and, with that, the reference to surpass. Some companies brought similar models they sold elsewhere, such as Ford, Peugeot and Renault, while others followed the Germans and developed their competitors from scratch. Fiat did the latter for the first time with the Palio, which was released in 1996.
Back then, that market offered very few models, so those (and the other body styles derived from them) were the only options for almost everyone who couldn’t afford luxury cars. Those hatchbacks turned out to be quite profitable, despite existing mostly in Latin America, so several manufacturers invested in them without fear. Most models received a larger variety of body styles, equipments, engines, and/or trim levels than any others ever offered by their manufacturer in that region.
Palio and Gol were two of the most iconic models of that category. Both were developed in Brazil, albeit with some foreign components, came from two of the most important manufacturers of the local market, and embodied all the aforementioned charateristics of that kind of hatchback. The most important difference between them was that the Palio was focused on comfort, whereas Volkswagen’s model was fond of sportiness. Then again, their true priority was pleasing the Latin-American customer.
The Gol was the first car to use direct injection and bi-fuel engine in Brazil, while the Palio’s siblings brought extended and crew cab to compact pickups (Strada) and founded the pseudo-off-road niche (Palio Adventure). The two hatchbacks went from high-performance versions GTi and 1.8R to low-cost Special and Fire and received components such as turbocharger, sunroof, semi-automatic transmission and side airbags back when they were rare even in market categories of higher price in Brazil.
In the meantime, their manufacturers had completely different lineups in Europe, which was the other important market for them regarding compact cars. The Italians offered Cinquecento/Seicento and Punto through the Fiat brand and Ypsilon and Delta through Lancia. The Germans, in turn, had the Lupo as the single supermini and the Polo right above it. Volkswagen tried to sell the latter in Brazil at third and fourth phases, but had little success because it was too expensive for the Gol’s buyers.
That situation came to change because its entire context began to do the same. Over the years, more manufacturers entered the Latin-American market, some of those offered models which turned out to be competitive enough to pose serious threats to the best-sellers, and people began to want and choose automobiles of other kinds. That market slowly became more connected with the others around the world, so the dominance of those regional hatchbacks (along with their derivatives) was about to end.
Singles and childless couples found those car models too big and expensive, so they migrated to smaller ones. Most families went to minivans and, later, crossovers. Even people who enjoy refinement were encourage to go away, because models such as Citroën C3 and Fiat Punto were sold in Latin America in a market niche slightly above Palio and Gol’s. Brazil’s best-selling category was quickly stripped of a huge chunk of its buyers. Naturally, manufacturers did their best to react as soon as possible.
The most conservative ones kept offering one hatchback and derivatives, but made them more specific — the Chevrolet Onix and Prisma, for instance, aim at young, tech-savvy drivers. Others, like Ford, opted for producing two cars: the Ka attracts the low-budget part of the original consumers while the Fiesta seeks those who want a more sophisticated model. Fiat and Volkswagen, on the other hand, attempted to maintain their sales figures by competing at the renewed hatchback market with three models.
Now, if that was the only problem, the makers could just tailor those cars to a more restricted public. The actual reason why things got ugly is that both are reinventing themselves in Latin America. Fiat is slowly building a whole new image for itself while Volkswagen wants to align its local lineup with that of other big markets as much as possible. As a result, the Palio suddenly became too old and the Gol became too regional. On the past few days, both makers began to reveal what will be done with them.
Fiat released the Argo in a wide price range so its more expensive trims could replace the Punto and the cheaper ones the Palio. Normally, the latter would survive only with its base trim as a low-cost option for a year or two but, since there are both Mobi and Uno below it, the Palio was discontinued altogether. Besides, the Argo’s base trims turned out to sell well, so the Uno is likely to be phased out too. That would help Fiat’s renovation because those nameplates have been used for decades.
Volkswagen, in turn, wants to offer only the up! and the Polo, like in Europe. The Brazilian lineup has two regional models, the Gol and the Fox, but there are many reasons to expect the latter to be replaced by the Polo. Things are different with the Gol because its image is very strong, especially in Brazil. VW will keep it in line, so it’s probable that it’ll be updated to become more practical than the up! and simpler than the Polo. The result could be halfway between the Ford Ka and the Renault Sandero.
Once those plans are finished, the “Brazilian hatchback” will no longer exist. All the models available will be either more practical, more sophisticated or focused on an emotional aspect such as visual sportiness or (very) light off-road use. Because of that, models now attempt to be great for some groups of buyers, rather than merely regular for all of them. As a result, the hatchback segment became somewhat more inclusive; there are several models selling rather well at the same time.
There is an exception to that when it comes to Brazil: the Chevrolet Onix has been its best-selling car since 2015 by a wide margin. However, considering that it was first released in 2012, it already follows the modern guidelines of hatchbacks in Latin America. It attracts people mostly for being stylish and offering modern equipments, rather than the aforementioned qualities of older models. Because of that, most of its direct competitors are just as capable of becoming leaders as it has been.
The changes which compact hatchbacks have undergone in Latin America represent a trend which has appeared in the whole world to some extent: manufacturers are paying more attention to the emotional interests of their potential consumers. They’ve realized that it’s impossible to create the best hatchback, so they’re focusing on making each one better to some buyers. As previously mentioned, that brings the very positive consequence of giving all models a chance to thrive in the market.
