The Tata-Fiat alliance is on shaky ground once again, with Tata group chairman Ratan Tata saying the joint venture needs to be critically examined to optimise its potential.
“I have to admit that so far the venture with Fiat has not been as active as we had thought,” Tata said in an interview to JD Power.
Among other things, the Italian company needs to bring in more new models to India, the Tata chief said.
Analysts feel the biggest challenge for Fiat is to boost the number of product offerings it has at present. Without a wider range of products, the company stands little chance in a market that is seeing fierce competition from global auto biggies.
The joint venture, now nearly four years old, is still struggling to achieve breakeven. It had suffered a loss of `260 crore in 2009-10 and could report similar hurt for 2010-11, too, say analysts.
“It is difficult for the partnership to break even as Fiat is unable to bring in enough products in the market. However, the company’s products are faring well in the market as far as pricing and features are concerned. Fiat’s sales are not growing, which is becoming a serious concern for both companies. Only a better product portfolio might work in the company’s favour,” said an analyst with a domestic brokerage who did not wish to be named.
Tata, however, ruled out the possibility of the two companies parting ways.
“Tata Motors accords great importance to the strategic alliance with Fiat. The introduction of Fiat engines in the second generation Tata car platform (the Tata Indica Vista and the Tata Indigo Manza) has played a critical role in the performance and growth of these brands,” a company spokesperson told DNA in an email response to a query.
“As for sales of Fiat products in India, both Fiat and Tata Motors are engaged in further building volumes. There are more opportunities and the two partners are engaged in considering opportunities, including considering more Fiat products in India,” the spokesperson said.
Under the 50:50 joint venture inked in 2007, the two companies are jointly working on distribution network and back-end support, besides co-manufacturing products at the Ranjangaon facility near Pune.
The facility has a capacity to produce 200,000 cars and 300,000 engines a year. It makes the Fiat Palio, Punto and Linea, as well as engines for Tata’s Indica small car and the Indigo sedan. The two companies have a network of 170-plus dealers at 130-plus locations.
Fiat sold 21,066 units in FY11, compared with 24,727 units the previous fiscal —- a decline of 14.81%.
Analysts feel the perception about Fiat cars is still very poor in India.
“Fiat has the best engines to offer currently. However, customers are still not comfortable in buying a Fiat product due to its legacy. Moreover, with just two major brands —- Punto and Linea —- the company is not able to make a mark in the market,” said an analyst from PINC Research.
The company faces problems related to its service and spare parts. Despite having good quality products, the company is suffering to build a strong brand name. “Fiat is not an easy brand to retail. The quality challenges related to Tata brand is rubbing off on Fiat as well. Unless the quality issue is not resolved, Fiat will struggle to build a brand name in itself,” said Mohit Arora, executive director, JD Power Asia Pacific.
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