How the Compass, the entry-level Jeep SUV, will give FCA India Automobiles the capability and the confidence to move on to other projects it’s planning
In FY16, FCA India Automobiles, still recognised as Fiat, sold just 8,361 units. In FY17, sales declined 32% to 5,665 units, accounting for less than 0.5% market-share. But last week when I meet Kevin Flynn, the president & managing director, I get a flash on my phone that the company has received an order to supply 2.2 lakh engines to Tata Motors and Maruti Suzuki. FCA India appears to have a unique business model—it sells a few hundred cars every month but a few hundred thousand engines every once in a while.
“Our business model is how do we maximise our investment in India. We have an engine strategy, have actively looked at collaborative projects, and are happy to supply to whosoever finds our engines a good fit for their vehicles. At the same time, we have upgraded the Ranjangaon, Pune, plant, at an investment of Rs 28 crore. We have started manufacturing the 2.0-litre diesel engine, and if any company shows interest in that, we’ll be happy to offer,” says Flynn.
The largest selling diesel engine in India is the Fiat 1.3-litre Multijet. It powers most diesel cars sold by Maruti, a few models made by Tata Motors and Chevrolet, and, of course, Fiat’s own cars. (In the S-Cross 1.6, Maruti uses another, more powerful Fiat engine, the 1.6-Litre Multijet.)
Yet selling less than a thousand cars every month doesn’t bode well for a behemoth whose global portfolio includes automotive names such as Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Ram Trucks, Abarth, Mopar and SRT. In India, FCA markets Fiat cars and the Abarth and Jeep brands.
“We would like to be in a stronger position from a product point of view,” Flynn says. “There’s a huge amount of respect for Fiat in the Indian market, but we need freshness in our model range. The current models are late in life-cycle.” He’s correct. Over the last few years, it’s the new models that are driving sales. Gaurav Vangaal of IHS Markit says that if it weren’t for new models, the growth rate of the passenger vehicle industry would have been far lower.
FCA is working on its model range, one brand at a time, beginning with the Jeep.
“Our next important launch is Jeep Compass. This SUV will be locally manufactured and Ranjangaon will be the only plant where the right-hand-drive (RHD) model will be produced and exported to all RHD markets, including the UK, Japan, Australia, South Africa and New Zealand,” Flynn says.
The Compass is an entry-level premium SUV. It will be likely powered by Fiat’s new 2.0-litre diesel engine, mated to both manual and automatic transmissions. The power is close to 170bhp, propelling the SUV from 0-100kph in under 10 seconds. FCA might also give it a petrol engine. Analysts say it will be priced about Rs 20 lakh and will compete with Hyundai Tucson, Honda CR-V and even higher-priced Toyota Fortuner and Ford Endeavour. The launch is expected in mid-2017. Flynn doesn’t share the localisation content. “It’s going to be very high,” he says.
FCA brought the Jeep brand to India last year in July. The vehicles, since they were CBU imports, were exorbitantly-priced—the Wrangler at Rs 71.59 lakh, and the Grand Cherokee in three variants from Rs 93.64 lakh to Rs 1.12 crore. In February, FCA drove in the new Wrangler priced Rs 56 lakh, yet the brand hasn’t picked up. Flynn doesn’t comment on the number of units the Jeep has sold, but says that one of the reasons for bringing those cars was making a brand statement. “The new Rs 56-lakh Wrangler has gained a bit of traction,” he says.
It appears FCA has been focusing a lot on Jeep, rather than its primary brand Fiat. Flynn disagrees. “There’s a time for everything. Right now, with the level of investment we’ve made, it’s critical that we focus on the Compass. What comes after that will be the next chapter in FCA India’s journey.”
The Compass will also give a major boost to FCA India’s export plans. In FY17, the company exported a mere 135 units. The Compass would be only the second car to be exported to Japan from India, after the Maruti Suzuki Baleno hatchback. “Japan is one of the world’s most quality-conscious markets, and the fact we’d be exporting to Japan shows the kind of quality standards we’re targeting for the Compass,” Flynn adds. “It will also give us the capability and the confidence to move on to the other projects we’re considering.”
To promote Jeep, FCA has a strategy called Jeep Destination Stores. Years ago, the company had a marketing channel called Fiat Cafe, to promote the Fiat brand. The strategy failed. Flynn is unperturbed. “The Fiat Cafe was an interesting concept. You could enjoy a cup of coffee, read books and check out Fiat cars and accessories. The idea was to connect the Fiat brand to the Italian cafe culture, to convey its Italian-ness. It was a good attempt but I cannot comment why it didn’t work. That’s the past. Jeep Destination Stores is a different strategy—to set up ourselves in 10 core areas and make a statement that something different is happening out there.”
FCA had planned to open 10 Jeep Destination Stores by December 2016. But, as of now, it has only seven—Ahmedabad, Bengaluru, Chennai, Kochi, Kolkata, Mumbai and New Delhi. Two more in Chandigarh and Hyderabad will soon be set up.
Bain & Company and Facebook have released a report on how digital is transforming the face of the automotive industry. Among other things, it finds that 72% of Indian customers select a vehicle brand and 49% choose the vehicle model before stepping into a dealership. “Digital presence is important,” Flynn says. “A few weeks ago we released a teaser clip on the Compass and it has already seen over 2 million downloads. The anticipation for the Compass is phenomenal. We have to ensure its success.”
The next focus area for FCA is Mopar. It’s the company’s parts, service and customer care organisation. The name is short for ‘motor’ and ‘parts’. “Introducing Mopar is part of the strategy to revamp the sales and service network and transform FCA’s image. With new vehicles, we need higher standards of service, technical competence and instant availability of parts. We’ve studied long and hard the success of Mopar in the North American market and hope to replicate the same in India.”
At the Geneva International Motor Show in March, Sergio Marchionne, the CEO of FCA, had reportedly said the Fiat brand cannot expect to ‘relive’ its history in India and would instead have to ride on the Jeep brand to make its presence felt. The Compass, clearly, is key to FCA’s turnaround in India.