Fiat struggles in India multiply after Tata break-up

About four months after Italian car maker Fiat severed ties with Tata Motors and took charge of commercial and distribution activities of its branded cars in India, demand for its range of vehicles has fallen further.

From an average of about 1,800 units a month in 2010-11, Fiat sales dropped to about 900 units a month in the first four months of this financial year, according to data from the Society of Indian Automobile Manufacturers.

Fiat Group Automobiles India, the new company formed for the distribution and service of Fiat cars in India (after these operations were separated from the joint venture with Tata Motors), is mandated to set up a new Fiat dealer network.

However, slackening demand for Fiat products and the lack of an adequate range of products is keeping dealers at bay.

Tata Motors dealers, among the first to have been approached by the Italian company to set up separate Fiat sales outlets, appear reluctant.

"It should make business sense for us.

"If we realise Fiat is struggling with volumes, the brand and the number of products offered, we cannot invest crores on setting up separate outlets for it. How would we generate returns if we sell 10-20 units a month?

Dealers who have been in this business for generations know it would be a gamble to make fresh investments," said a dealer selling Tata Motors cars for more than a decade.

In May, a few days after it parted ways with Tata Motors, Fiat had unveiled its first exclusive dealership in Hyderabad.

However, no new exclusive outlet has been opened so far.

The company maintains it is positive on the announced target for dealership expansion -- opening 20 such outlets by the year-end and accounting for 80-100 dealers in the next 14

months.

"We have received a very positive response from existing Tata Fiat dealers and new entrepreneurs.

There is a lead time for construction and activation of new physical facilities, typically four to six months, depending on whether the facility is a partially-ready building or a greenfield facility.

"We are very confident of meeting our announced targets for 2012 and 2013," said a Fiat India spokesperson.

"Currently, Fiat retails only the Grande Punto and Linea models in India. Both models are positioned at the premium ends of their respective segments.

While the Linea sedan is priced at Rs7.13 lakh, the Grande Punto costs Rs5.06 lakh (ex-showroom, Mumbai).

"Gradually, Fiat will stop supplies to the joint dealerships operating now, once their standalone stores are running. But it is not easy for them to win dealerships.

"In cities like Mumbai, where real estate prices are the highest in India, it wouldn't be easy to generate returns," said another Tata-Fiat dealer.

Though Fiat has phased out the Palio from 13 city markets, it has not shown any real interest in introducing new models.

The Fiat 500, a lifestyle mini, was phased out last year, as the company decided against upgrading the car to suit India's emission standards.

V G Ramakrishnan, senior director (automotive), Frost and Sullivan, said, "Fiat products never got their due. The failure of Fiat has more to do with the marketing strategy they adopted, than anything else.

"Joint dealerships are very common in western markets, but India is a very different place. In addition, below-par servicing for Fiat cars hit its brand image."