The two-year old alliance between Fiat and Tata Motors has done little to improve the former's domestic sales.
In 2006-07, the first full financial year since the two companies came together, only 2,208 units of Fiat Palio were sold in the country. During the same period, close to 1.45 lakh (145,000) units of Tata's small car, Indica, were sold across the country. Fiat Palio sales in the whole of 2006-07 is approximately equal to what car market leader Maruti Suzuki sold in a single working day in the year.
In the first eight months of the current fiscal, 2,319 units of Fiat cars were sold in India, growing 39 per cent over the same period last year, said a Fiat India spokesperson. During the same period, Tata Motors sold 90,614 Indicas, resulting in a flat growth over sales in the comparable eight months of last year.
The alliance, however, has resulted in the setting up of a greenfield plant in Ranjangaon near Pune. The plant entered the first phase of commercial production in April this year. Investment in this new plant, shared equally by the two partners, would over the years accumulate to Euro 650 million (Rs 3700 crore). This plant will roll out both Fiat and Tata Motors' cars.
Though the two companies spoke about the alliance first in September 2005, they formally shook hands at the 2006 Auto Expo, marking the beginning of the "endearing partnership".
While experts agreed that two years might be too short a time to say anything conclusive about the strategic partnership's future, more was expected in terms of improving Fiat's domestic sales in India. Fiat cars as of today are sold from 65 Tata Motors' outlets across the country. They also provide after sales services.
Assembly of the Palio Stile from the new plant started in April this year. The plant at full capacity is expected to make 1 lakh cars (of both Tata Motors and Fiat) and 2 lakh engine and transmissions a year.
Experts say that the problem with pushing more Fiat cars in India has more to do with the company's battered image domestically than Tata Motors' inability sell the Italian brand. Explaining Fiat's second coming on the Tata Motors network, Mohit Arora, senior director at J D Power, Asia Pacific, said, "Tata will have a greater focus on selling their cars and dealers will focus on what they can sell easily."
"There is also the issue of customer perception. What does Tata stand for and what does Fiat stand for? There is a need for positioning the products correctly," he added.
Today, dealers who sell both Tata and Fiat cars from the same outlets clearly demarcate the lines even within the showroom. "I have a separate set of sales people for Tata and Fiat cars," said a leading Tata Motors' dealer in Mumbai.
Abdul Majeed, partner, PricewaterhouseCoopers, said the only way Fiat can salvage its image in India is through good brand recall advertisements and a stronger line up of small cars.
"Fiat needs a great line up of products to erase their past," he said. Failure on the part of the 2001 launch of Fiat Palio and poor after sales service continues to haunt Fiat's image in India. While the fuel economy is an issue that is being dealt with in the new range of Palio, more Fiat models are expected to be rolled out of the Ranjangaon plant in 2008.
"The joint venture will also manufacture the Grande Punto and the Linea, Fiat's successful 1.3 litre multi-jet diesel engine, its 1.2 and 1.4 litre Fire gasoline engine and matching transmissions," said a Fiat India spokesperson.
