Fiat posts R227.4-crore loss in FY11, yet to break even

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Jan 17 2012, 07:45am hrs
Despite attempts to chart out a new marketing strategy to ramp up sales in the worlds second fastest growing car market, Fiat India posted a loss of R227.4 crore in 2010-11. The company has, however, reduced the quantum of loss by over one-fifth compared to R290 crore in the previous fiscal.

The Financial Express has a copy of the companys balance sheet that it submitted to the registrar of companies in December last year. Fiat India is a 50:50 joint venture between Italian car maker Fiat and Tata Motors.

Since setting up its operations in India through the JV in 2007, the company is yet to break even. In fact, earlier this year, the companys JV partners had collectively infused R150 crore to pare losses, but to little effect. During the last fiscal, the companys revenue increased nearly 30% to R4,077 crore against R3,152 crore in 2009-10.

Owing to higher commodity prices, the companys raw material costs jumped 15% to R2,941 crore against R2,554 crore in the corresponding fiscal. In 2009, the company had said it would break even by 2011-12.

Over the last one year, the company has been trying to put in place a new dealership strategy as per which it is setting up its own exclusive dealer outlets which would co-exist with Fiat-Tata branded dealerships. The company hopes that the move would not only help Fiat come out of the shadows of Tata Motors but also enhance its brand. Earlier this month, Fiat India set up its first wholly-owned dealership in the capital. The company is looking to open 20 such dealerships by the end of the calendar year.

At present, there are 167 joint Tata Motors-Fiat dealerships in the country. During the Auto Expo managing director (India operations) of Tata Motors PM Telang had said that the idea behind having separate dealerships was also to reduce the pressure of overloading on existing joint dealers of the JV.

In an interview to FE in September last year, president and CEO of Fiat India Rajeev Kapoor had said, We (Tata and Fiat) are not going separate ways. But our approach to the market is being done differently now. We feel that both the brands should be seen differently. The same dealer will have to open two dealerships in a different location/showrooms.

Since the JV was commissioned in 2007 it has fallen woefully below expectations. In fact, Tata Group chairman Ratan Tata had said to market research firm JD Power last year that the JV needed to be critically examined.

A Mumbai-based automobile analyst, who tracks Tata Motors, said, Tatas want Fiat to be a success in India. Some early signs of it are clearly visible.

The analyst was referring to the increased advertisements and marketing initiatives adopted by the company in the recent past. He also said that the company needed to launch absolutely new vehicles on new platforms to increase its passenger vehicle sales. In 2010-11, Fiat Indias sales declined 15% to 21,066 units against 24,727 units in the corresponding fiscal.