Fiat mulls separate distribution network

Written by Rajat Guha | Rajat Guha | New Delhi | Updated: Oct 12 2010, 11:16am hrs
Cracks may have surfaced in the three-year old joint venture (JV) between Tata Motors and Fiat, as the latter is considering separating its distribution network from Tata Motors. However, as far as the broader JV is concerned, all other tie-ups except joint dealership will continue like joint production of vehicles.

Industry sources said that unhappy with monthly sales of its cars, the Italian car maker is doing a serious rethink on its India strategy. While the company had initially aimed at total sales of over 4,000 units which includes Linea and Grande Punto, it is barely reaching even half that number. Sources said that Fiat will set up its own pan-India distribution network gradually and simultaenously maintain its exisiting shared dealeships with Tata Motors. Fiats short-term objective is to increase sales of its existing car lines and also incorporate future variants and new models that are planned over the next 12-18 month period. An e-mailed query to a Fiat spokesperson did not elicit any response till the time of going to the press.

The development would also mean reversing the grand merger of the two retail networks that was carried out in 2007 when Fiat's 40 dealers and Tata's dealer network of over 100 were gradually combined. Today the total joint-dealership strength stands at 175 which will hit 200 dealers by the end of 2010. Fiat has a joint venture with Tata Motors through which they share production facility at Ranjangaon in Maharashtra and distribution network as well.

Over Rs 4,000 crore have been invested in Ranjangaon on land already with Tata Motors. Ranjangaon has the capacity to make 200,000 cars and 300,000 engines, some of which are also exported to Fiat plants overseas.

Fiat India has reported Rs 22 crore profit for the first quarter against Rs 166 crore loss for the corresponding period a year ago. Revenues doubled to Rs 967 crore from Rs 473 crore.

This signals a turnaround in the three-year-old joint venture, given the losses it had accumulated in the past many quarters.

Fiat makes mid-size Linea and hatchback Grande Punto and Tata Motors makes Indica Vista and Indigo Manza at Ranjangaon.

The capacity utilisation at the plant has been increasing over the years. In the last fiscal, Fiat produced 24,000 cars and this year it hopes to double production.