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Journalism of Courage
Consumer memories are notoriously short, but many Indian consumers of a particular vintage still remember their Fiat moments. As younger consumers take charge of the exploding automobile market, these memories are fading. Fast. That’s why Italian car giant Fiat is stepping on the gas in a desperate race for survival.
After successive failures since its re-entry into the market in the early 1990s, Fiat is finally addressing the weakest link in its strategy: customer confidence in the company and its vehicles. The marketing and after-sales service tie-up with Tata Motors is a key part of its comeback plans.
‘‘We want to be an important player. We want to restore customer confidence in Fiat and improve our dealer and service networks, which we believe can be achieved with this tie-up with the Tatas. Once we do this, we will also bring in new models,’’ says Fiat India’s Managing Director Giovanni de Filippis.
In order to tackle a limited portfolio, the company is planning to launch new brands, including the Grande Punto, which would be a player in the premium hatchback segment. But don’t expect a launch this year while Fiat puts its house in order.
‘‘Punto could be a make-or-break product for Fiat in India. Before it launches the product in the market, the strategy of Fiat would be to strengthen its distribution, for which it would need Tata’s support,’’ says R Raveendra, Angel Broking’s auto analyst.
However, experts are sceptical over whether the Tata tie-up will revive Fiat’s fortunes in India. They argue that Tata gains more than Fiat, which now gets a distribution network, but still has to deliver a winning product.
Fiat is likely to share its manufacturing site at Ranjangaon with the Indian automotive giant. Tata Motors, which presently has only one manufacturing plant for passenger cars in Pune, desperately needs additional capacity to meet demand. If this sharing happens, Tata Motors would be a clear gainer. ‘‘We are looking at enhancing our capacity…we could set up our own new plant,’’ says Rajiv Dube, Tata Motors’ vice president (Passenger cars).
Fiat’s Ranjangaon plant has a capacity of producing one lakh units annually. This unit is lying vacant with most of Fiat’s production taking place at its plant in Kurla. ‘‘It makes much sense for the Tatas to take their agreement with Fiat forward by sharing their production facilities at Ranjangaon rather then set up their own greenfield project which would be highly capital intensive,’’ said an analyst.
Then, all of Tata’s passenger vehicles and Fiat’s Palio and Adventure would now be sold through a joint retail network spread across 11 major cities in India.
Will this work? ‘‘This arrangement would definitely help Fiat as it needs a partner with a strong marketing strength in this country. However, the tie-up could be messy in the short term as products like Palio and Indica’s new petrol version overlap in the market,’’ says Hormazd Sorabjee, Editor, Autocar India.
That’s hardly reassuring for a company that has invested close to Rs 2,200 crore in the Indian market but has not been able to make a dent due to tough competition, poor after-sales service, and dealership problems.
For a company that boasts of acclaimed cars like Uno, Sienna and Palio, the numbers tell the story: Fiat India sells around 300-400 units a month, mostly Palios. Hyundai—which came in much later—sold 18,000 cars in February 2006, while Tata Motors got 45,000 new customers in the month.
As Fiat gets its house in order, reclaiming that brand cache is going to take a lot of drive.
