"We can live with that as we now earn significantly more," said Manfred Kantner, brand director at Fiat Deutschland, which handles sales for the Fiat, Lancia and Alfa Romeo brands in Europe's largest market.
Compared with 2004, first-quarter sales of Fiat brand models in Germany are down 36.6 percent and Lancia's sales have fallen 18.5 percent.
The slide was expected.
"Highly discounted fleet sales and subsidized day registrations represented a huge part of our sales in 2004," Kantner said during an interview. "This had a correspondingly negative effect on the profit."
An added benefit of the change is that Kantner expects a rise in the cars' residual values.
Many Fiat dealers in Germany welcome the change. "This is the right strategy for the long-term," dealer association spokesman Friedrich Karl Bonten said.
But the change also puts more pressure on dealers. Bonten said he fears that some Fiat and Lancia businesses will face "big financial problems" in 2005 as sales continue to decline due to the change in strategy.