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Fiat to continue joint venture with Tata Motors

By Motortrend India Staff   |   24 August,2011

Close on the heels of Ratan Tata’s statement on reworking Tata Motors’ link with Fiat, the Italian car major has said that their partnership will continue, albeit the terms will be revised. “The terms will change, but the project will keep going ahead,” Sergio Marchionne, CEO, Fiat, told reporters on the sidelines of an event in Italy. Earlier, Ratan Tata had said that both Fiat and Tata Motors are having a relook at their 50:50 joint venture partnership to see if it could be made more realistic.

While admitting that the contractual relationship had suffered losses, he said: “Assumptions in terms of volumes didn’t work out, more so for Fiat than for us because there was a downturn and they made an assumption on off-take, which did not materialise.” One of the major problems for Fiat has been the fact that for cars sold through Tata's network, dealers tend to favour selling Tata vehicles, than Fiat, said industry experts. Also, Fiat has not been able to build an aspirational value for its brands to pull more customers. Industry experts said that while the manufacturing partnership should remain, both companies need to revisit their distribution agreement. Fiat should aggressively look at building its own distribution network and a brand affinity in the market. “The joint dealership could not deliver to the full extent.

If both companies feel that it has not worked then they should start working at it right now. The agreement should give flexibility to Fiat to have its own distribution network. And Fiat needs to reinvigorate the brand at the ground level,” said VG Ramakrishnan , senior director, automotive and transportation, Frost & Sullivan. Fiat needs to rebuild its image, said Pradeep Saxena, executive director, TNS Automotive. “When you have an image, which you have to erase and rebuild, Fiat needed to have invested big money.

The idea was right, but the partners could have done better in implementing it,” he said. The joint venture has reported a loss of. 1,214 crore in the past three years. Though the partnership has lowered its losses to. 243.60 crore in FY11 from. 272.30 crore in FY10 due to cost cutting and higher exports, its sales in domestic market has declined, despite discounts and promotional drives.

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