Tata-Fiat venture turns profitable

Cost management, lower interest and depreciation outgo helps

Fiat India Automobile, the joint venture between Tata Motors and Fiat, has turned profitable after being in losses for over five years. The 50:50 venture, which makes cars, engines and transmission assemblies for local and export markets, posted its first profit in 2012-13, according to Tata Motors.

Fiat India Automobile reported its best profit till date of Rs 400 crore in 2014-15 on better cost management and lower interest and depreciation outgo.

In 2013, Fiat and Tata ended their agreement that was in place since 2006 to sell Fiat cars through Tata dealerships. Fiat's sales were disappointingly below expectation and it started appointing its own line of dealerships. Fiat’s sales saw a dip of 13 per cent in 2014-15 to 10,380 cars, according to the Society of Indian Automobile Manufacturers. However, the manufacturing agreement, which includes a joint plant in Ranjangaon near Pune, was continued. Fiat's Punto, Avventura and Linea and Tata Motors’ Vista and Manza are manufactured at the plant.

Fiat India Automobile has been making cash profits since 2011 and the profit after tax has been positive since 2012-13. The company's profit after tax was Rs 400.4 crore in 2014-15. Tata Motors has invested Rs 1,567 crore in the venture, yet Fiat India Automobile's net worth was Rs 1,168 crore on March 31, 2015, according to Tata Motors’ latest annual report. Tata and Fiat have held talks over new investments and cars to be produced from the plant. Fiat has committed Rs 1,800 crore ($280 million) to streamline the plant in order to produce its next range of cars. Tata Motors is developing compact utility vehicles that are slated for launch next year.

It has the option of manufacturing these vehicles either at Pimpri, also near Pune, or at Ranjangaon. Fiat has been planning to launch sports utility vehicles under the Fiat and Jeep brands.

These plans have been delayed by over two years. Jeep will now come to India in 2017.

The two sides had discussed sharing engines and transmission assemblies as an extension of their agreement, sources said. Tata Manza will add new Fiat-developed engines.