Fiat tries hard to shift gears

The Italian car manufacturer wants to forget its troubled past through a slew of new initiatives. The small car, expected to be launched next year, is just one of them

In 2006, Fiat India announced a joint venture with Tata Motors under which the two companies merged their respective retail networks. It was perceived to be a masterstroke. And it worked – but only for Tata Motors, which got Fiat’s engines for its cars, and showed a decent increase in sales.

For Fiat, however, the JV did nothing. For example, while the industry recorded a stellar growth rate of almost 30 per cent in the fiscal year ended March, 2011, Fiat was the only company whose volumes actually fell 15 per cent to 21,112 units, giving rise to murmurs that the joint dealerships are pushing Tata products more than Fiat cars.

 

With the Punto and Linea in its portfolio, Fiat’s market share was less than 1 per cent last fiscal. In contrast, even Volkswagen, which entered India only in 2007, commands a share of 2.04 per cent.

The Grande Punto (a compact hatchback), which Fiat wished to position as a lifestyle product, was supposed to sell 3,000-4,000 units every month, according to internal projections made by the company. However, the car, which starts at Rs 4.45 lakh (ex-showroom Mumbai) has a monthly run-rate of just 1,000 units. Compare this with Maruti’s Swift (Rs 4.43 lakh, ex-showroom Mumbai) which sells 12,000-13,000 units every month.

In the mid-size sedan market, Fiat is way behind everyone else. In fact, Honda and Toyota sell nearly as many Civics & Corollas each at almost twice the price than Fiat sells Lineas. So the massive disconnect with the customers was apparent, leading to speculations that the joint venture with the Tatas was about to be scrapped.

But the JV wasn’t the only problem for Fiat. An even bigger issue was the growing customer complaints about the lack of a comprehensive service back-up, and the poor mileage and high maintenance costs of Fiat cars. The result: Palio and Uno, which were priced below Rs 3.5 lakh failed to attract new customers. In fact, due to unimpressive demand for Palio, the company has decided against upgrading it to new emission levels.

But Fiat is trying to forget the past in a hurry by doing three things. First, the Italian car maker has already signaled that the JV with the Tatas is very much alive and is strengthening it; second, it is addressing the biggest complaint of customers by putting in place an elaborate maintenance and 24x7 service network; and third, it is in the midst of developing an India-centric small car.

Fiat India’s Chief Executive Officer Rajeev Kapoor acknowledges the “challenges” that the JV faced and says it has been a learning experience for both the teams. But he says the initial glitches are being sorted out. For example, earlier, when a customer entered a dealership, he did not know whether he was being served by a Tata Motors sales representative or a Fiat sales representative. That led to confusion as the sales people had little knowledge of all the brands. “We now have dedicated people for each brand wearing different uniforms so that the customer knows whether he is talking to a Tata Motors guy or a Fiat guy,” Kapoor says.

Besides, the JV is working towards separating its front end network to focus better on individual brands. Floor space is being clearly segmented with dedicated response teams. While these new initiatives will call for additional investments to those dealers who are also selling the Nano with its wafer-thin margins, the JV is also discussing offering a financial backing to such dealers to help acquire real estate and set up teams.

While changes are being made to the sales and distribution approach, the JV has also seen new talent coming in. According to Kapoor, there have been several new appointments in the JV company, primarily led by Tata Motors.

To enhance customer experience, Fiat is also opening several cafes to establish a personal ‘connect’ with buyers. Starting with Delhi and Pune next month, Fiat’s cafes would welcome guests to experience its rich auto background and Italian heritage and will also host private events.

But the ace up Fiat’s sleeve is clearly the small car that will be priced below the Palio. At less than Rs 4 lakh, it is expected to compete with Maruti Suzuki and Hyundai Motors.

“If you look at competition, their numbers have gone up only because of the small cars. A car like that is a volume car. One may not get any money out of it, but it gives your brand the much required exposure and visibility in the market”, believes Kapoor, specially when the company has more or less sorted out its distribution and service centre problems.

The car, which is currently under development, is expected to be launched by the end of next year and will sport a new 1 litre engine, the same configuration as the Maruti Wagon R and the Hyundai i10. The new car, Fiat hopes, will go a long way to allay concerns over mileage of the existing cars in its portfolio.

Besides, a new Fiat 500 with Bharat Stage IV engine will be launched sometime this year.

“We hope the utilisation of our plant in Ranjangaon goes up this year because we are working on a lot of different projects. The more we utilize, the better would be the profitability. We are going to do about 60 per cent this year”, Kapoor adds.

Customers would be hoping that too.