Adapting the pricing strategy to the Worldwide Harmonized Light-Duty Vehicles Test Procedures: the FCA case

The automotive industry is going to change more in the next ten years than in the last century. Developments taking place in Artificial Intelligence, IoT, self-driving technologies, Big Data, alternative powertrains, new regulations, car-sharing and ride-hailing services are going to drive the change. In this thesis we are going to focus on one of these aspects, the new regulations, and try to understand the legal framework that, in the following years, will condition EU OEMs to reduce the CO2 emissions of their light-duty vehicles – cars and vans – in order to contribute to the achievement of the EU’s commitments under the Kyoto Protocol and the Paris Agreement, since nowadays they represent around 15% of the total emissions of carbon dioxide – the main greenhouse gas. After having properly introduced the company in which I have done my internship, by the way, my first work experience, I am going to deepen a little bit, from a theoretical point of view, on what is pricing, the challenging task I was assigned to carry out, and what it particularly means within the company. Continuing with a theoretical approach I will move to identify which are the variables that influence the decision of setting vehicles prices. In that way, we will find out that the vehicles’ CO2 emissions is a variable to give serious consideration because it is every day becoming more and more important, as not only impacts on registration taxes in most of the countries but also on the penalties that OEMs will have to pay if they surpass the CO2 emission targets set by the European Commission. Moreover, these issues are going to be exacerbated by the introduction of WLTP, a more realistic and transparent new lab test that vehicles will have to undergo, which will provide higher CO2 emission values than its predecessor, the NEDC test, and it will radically change the way of doing pricing. Afterwards, analyzing the FCA's current pricing approval process, it will come out that it fails in some ways to act in response to these new challenges which need to be carefully managed, otherwise the company could even be out of the market in a few years’ time if it is not able to adapt. Finally, I am going to focus on the strategies the company should undertake to overcome these challenges and particularly on a project I was actively involved, which will substantially modify and improve the day-to-day running of the company’s pricing process.