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Palio likely to drive Fiat India to profit

The success of its Palio world car and aggressive new launches will help Italian auto giant Fiat's Indian unit break even this year and make profits in 2003, the local unit's chief said on Wednesday.

Fiat, which has invested around $500 million in India since 1997, has weathered a rocky start in a price-conscious market, which grew a meagre 0.5 per cent last year.

"We expect to make our first net profit in 2003," Maurizio Bianchi, Fiat India Pvt Ltd's managing director, told Reuters in an interview on Wednesday.

He said Fiat India expects revenue of around Rs 23 billion in 2002, up from 6.5 billion last year.

After selling just 13,478 cars in 2001, Fiat expects to sell 50,000 cars this year, most of them Palios, and sees a further 25 per cent growth in 2003.

This will give Fiat a market share of more than eight percent in 2002 in the 600,000-car Indian market, up from 1.7 per cent before the Palio was launched last September.

Fiat has invested in India through two units, Fiat India Pvt Ltd, a 97-per cent subsidiary, and Fiat India Automobiles Ltd, a holding company.

But Fiat India Pvt Ltd is for all intents and purposes the only operating firm as it does all the manufacturing and marketing.

PALIO, THE KEY

Bianchi said Fiat India plans to boost sales by using the Palio platform and an expanded dealer network, and cut costs by making a bigger proportion of each car in India.

"We have localised production to the extent of 85 per cent of each car in India, up from 75 per cent in September, and plan to increase our dealer and service networks during 2002," he said.

The most popular variant of the Palio is sold at Rs 430,000 and competes with Hyundai's Santro, the Zen, Alto and Wagon R from Suzuki's Indian affiliate Maruti Udyog, and the Indica, made by Tata Engineering and Locomotive Company Ltd.

The Palio is Fiat's "world car", made at nine locations around the world and sold in 40 countries. Of Fiat's total Indian investments, $150 million has gone towards the Palio.

The car gained high visibility soon after it was launched because of an aggressive advertising campaign. Fiat scored a major coup by signing on India's biggest sporting icon, cricketer Sachin Tendulkar, to endorse the car.

It sold 11,000 cars between January and March, most of them Palios.

Apart from eight variants of the Palio, Fiat India also sells the Siena sedan, the Siena Weekend station wagon and the Uno hatchback.

NEW LAUNCHES

Bianchi said that Fiat would start selling three new variants of existing models by June.

These are the Palio Weekend station wagon, the Palio Adventure, a cross between a multi-utility vehicle and a sports utility vehicle, and the new Siena.

The Siena Weekend will be discontinued and replaced by the cheaper Palio Weekend, and the new Siena will replace the existing model.

But the Palio will continue to be the single biggest driver of sales, and 42,000 are expected to be sold this year, Bianchi said.

He said Fiat had no plans currently to import cars like the Alfa Romeo and Lancia, and would prefer to concentrate on building on the Palio platform.

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