Why Tata is Worried about Fiat India?


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AMG

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When Ratan Tata said in an interview earlier this week that the four-year-old Tata Motors-Fiat joint venture "has not been as active as we had thought", he finally confirmed what the market has been quite vocal about for the past few months.

At the heart of the problem is Fiat's failure to bring in more models to India -- a fact the Tata Group chairman didn't forget to mention.

While the Tata Group still says it accords great importance to the strategic alliance with Fiat, analysts feel the main reason for the joint venture's indifferent performance (Rs 260 crore -- or Rs 2.60 billion -- loss in 2009-10 which is expected to increase for 2010-11), is its inability to improve its product portfolio.

Fiat's market share was less than 1 per cent last fiscal. In contrast, even Volkswagen, which entered India only in 2007, commands a share of 2.04 per cent.

Due to gross underutilisation of its assets (50 per cent capacity utilisation), mainly the mega car, engine and transmission manufacturing plant at Ranjangaon near Pune, Fiat India posted a staggering cumulative loss of Rs 970 crore (Rs 9.70 billion), in a little more than two years.

Eight months ago, Fiat India Automobile did try to address the problem by bringing in a new team to revitalize its sales, marketing and distribution network. But buyers are still not impressed with the Italian automotive brand.

Fiat sold 21,066 units in FY11, compared with 24,727 units the previous fiscal -- a decline of 14.81 per cent, and this came in a period of high sales growth for almost all automobile companies.

Since the appointment of the new team, sales of Fiat branded cars have dipped over 15 per cent to 13,446 units as against 15,874 units a year ago.


The fall in sales is in sharp contrast to the over 22 per cent sales growth achieved by the car industry in the same period.

Fiat presently sells three models in India, with one of them -- Palio Stile -- not available in the main city markets such as Mumbai, National Capital Region, Bengaluru and Chennai.

Fiat executives say the sales number did not justify the upgradation to BS IV level. Fiat's last model launch, Grande Punto, a premium hatchback, took place two years ago.

While the Punto costing Rs 4.45 lakh, sells an average of around 1,000 units per month, much less than the targeted 2,500 units,

The Linea, an upper mid-size sedan costing Rs 661,000, sells an average of 890 units, which is much below the 2,000 units per month targeted mark.


One of the steps that the JV had taken was that it re-approached some of its dealers asking them to change the way they market their cars. The plan included appointing separate man power and showroom space.

The new sales and marketing initiative demands further investments from the dealers. While some of the dealers welcome the change, many of them agree that Fiat suffers from a low brand recall in India leading to the lackluster demand.

"Fiat cars are not in the affordable range, they are at the premium end. Plus consumers also keep in mind the resale value of the car when they buy a vehicle. Fiat cars generally have a poor resale value compared to say a Maruti or a Hyundai", says a Mumbai-based dealer of Tata Fiat cars


Source: Business Standard
 
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Re: Why Tata is worried about Fiat India

If not Fiat, I am sure Tata has reaped the benefits of this alliance. By having cars from a world class manufacturer under the same roof does bring additional footfalls, although them converting into actual customers of those very cars has been low. Tata Sales ends up selling more tata vehicles because of prevailing price-sensitive mind set.
I have been in this argument with a lot of people and sometimes I think myself that why Fiat has been so cold to owning up the responsibility of running the whole show in India. Are they too scared or they dont want to get in the mud? God knows!

Imagine you going to a true Fiat dealership with something like a ferrari parked in too. Ideal situation.
 
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Re: Why Tata is worried about Fiat India

Whatever little reputation their A.S.S. has is because of the Tata tie up only.

Else nobody would be seen in a 50 radius of their dealership.
 
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Re: Why Tata is worried about Fiat India

Well, even Tata does not have a very good reputation either. But that was my point, why cant Fiat build that brand value. When others like Toyota or hyundai could come up with good service points, why cant Fiat?
 
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Re: Why Tata is worried about Fiat India

Because Fiat is like a coward soldier in a battlefield.

A traitor, so as to speak of.

They betrayed 1000s of Indians when the folded up and left.
 
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Re: Why Tata is worried about Fiat India

I still feel Fiat can do well if they try on their own. People going to TATA showrooms will end up buying Vista and Manza instead of Punto and Linea. Having two competitors under the same roof is not ideal. And also Fiat still suffers from the bad reputation of costly spares , unreliability and low re-sale value.
 
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Re: Why Tata is worried about Fiat India

@ cool

The Punto outsells the Vista.

And the Linea and Manza are a differentiated by a segment.
 
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Re: Why Tata is worried about Fiat India

Yes we know that Linea and Manza belong to different segment but most of the people walking into their showrooms will only want a good car with good FE , comfort and easy maintenance. It becomes an easy task for the SE'S also to pull the customers towards Manza as its cheaper too.


The plus points of Linea are its awesome ride quality , handling and long list of features. But how many of us are looking into the ride quality aspect? People move away from Fiat fearing costly maintenance and low re-sale value!
 
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Re: Why Tata is worried about Fiat India

That still doesnt explain why the Punto sells and the Vista is a dud.
 
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Re: Why Tata is worried about Fiat India

Vista well the only probable reasons i can think of is Indica taxi image and in that price range there are several better and reliable cars from Maruti.
 

350Z

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Re: Why Tata is worried about Fiat India

While Fiat scores less on brand value in India and so does the Tata Motors. However, I think that Tata-Fiat cars retailing under single roof is another great loophole here. Let us look at this way - Both the models (Vista and Manza) which Tata sells inside their dealership are placed lower than that of Fiat cars (Punto and Linea) but carry the same engine, albeit de-tuned. These Tata cars have minimum price difference of at least Rs.1 Lac each and also offer better fuel efficiency in return. Now which will be the most certain pick here? Yeah. You know it. As far as we talk about segmentation, does that really matter to a normal buyer unless he’s so status concerned? For him, all cars without boot are hatchbacks and all cars with boot are sedans. Typically buyers step inside Tata-Fiat showroom by being attracted towards beautiful Fiats (Read: follow heart) but end up purchasing Tata. Why? Simply for value for money factor (Read: follow mind).

Obviously, when a person is inside the dealership, let’s say, to check out the Linea. He’ll look at the Manza too. Now suppose he is not satisfied with Linea for XYZ reason – the dealer will push him towards Manza. Because for the dealer, selling something is better than nothing! Hence, this increases the sales intake of Tata Motors and Fiat remains as an unaware innocent kid. What I have said above is exactly what I experienced at Tata dealership alright. I was really inclined towards Linea but my budget permits only Active variant. Here, the dealer insisted me to buy Manza top-end instead which has same engine, similar features and what not? I totally agree with Thetraveller that Tata has reaped out major benefit with this partnership, if Fiat has not. It's high time, Fiat must set up their individual network and make the audience out there aware that Linea is value for money alternative when compared with Vento / City / SX4 and NOT with Manza. And almost same saga goes around the Punto too. All the best, Fiat! [thumbswink]

Drive Safe,
350Z
 
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Re: Why Tata is worried about Fiat India

But the fact remains that nobody trusts Fiat A.S.S. and if there is a break-up, the people will never buy a Fiat car.

I would stop just short of saying that Fiat has been able to survive, only due to the Tatas.
 
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Re: Why Tata is worried about Fiat India

While Fiat scores less on brand value in India and so does the Tata Motors. However, I think that Tata-Fiat cars retailing under single roof is another loophole here. Let us look at this way, both the models (Vista and Manza) which Tata sells inside their dealership are placed lower than that of Fiat cars but carry the same engine, albeit de-tuned. Now all these Tata cars have minimum price difference of Rs.1 Lac and also offer better fuel efficiency. Now which will be the most certain pick? You got it. As far as we talk about segmentation, does that really matter to a normal buyer unless he’s so status concerned? For him, all cars without boot are hatchbacks and all cars with boot are sedans. Therefore, typically buyers get inside Tata-Fiat showroom by getting attracted towards Fiat (Read: follow heart) but end up getting Tata for value for money factor (Read: follow mind). Obviously, when a person is in dealership, let’s say, to check out the Linea, he’ll give a look to Manza as well....
+1 to that. India is a market driven by head, so to say, as majority does not have access to luxuries and they have to take care of running full families and not just a car. It turns out that fiats are mostly bought by those who have additional money to spend or who live by their heart! Tata has taken advantage of this situation. Seen the new ad in circles regarding 4,00,000 Manzas on road, that is a mean achievement, whereas IMHO it should have been other way round, as Fiat is the one which makes those performing engines day in day out.

I for one would like Fiat to go alone for once. I know they failed last time, but then who doesn't fail in India. I am sure if they stick to basics and work on the service network they can also do a good job second time around.
 

350Z

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Re: Why Tata is worried about Fiat India

But the fact remains that nobody trusts Fiat A.S.S. and if there is a break-up, the people will never buy a Fiat car.

I would stop just short of saying that Fiat has been able to survive, only due to the Tatas.
You are partially right here. Fiat has re-established themselves in India because of the little long-term trust that people have on Tata Motors (Being Indian brand after all). But that worked only as a kick-start and nothing more. Now people know what Fiat is, and what do they produce. If they continue in long-term relationship with Tata then I guess, Fiat will be heading nowhere (unless they release VFM cars rivalling Manza and Vista) which will be like fighting inside their own house. Neither of the car manufacturers has faced a ‘huge’ loss yet, so it always pays off to act wisely on the time.

Drive Safe,
350Z
 
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