Tata Motors and its partner, Italian car giant Fiat, on Wednesday brought to an end their six-year old distribution tie-up as the latter looks to chart a new growth strategy in India.
Despite the introduction of globally acclaimed products like Punto and Linea, Fiat has seen its sales decline over the last two years. In 2011-12 its market share slid to below 1% in the world’s fifth largest car market.
Fiat cars would now be distributed under a new company controlled directly by Fiat Spa even as joint manufacturing and sharing of technology with Tata at its Ranjangaon factory would continue.
“The basic structure of the existing JV will remain intact, only the distribution of the cars would be done by a new company outside the JV,” said Rajeev Kapoor, CEO, Fiat India.
Fiat’s India operations would now be run through two companies — one for distribution and after sales, and the existing 50:50 joint venture with Tata that will continue to make the cars in India. Currently there are 178 co-branded Tata-Fiat dealerships in the country, which would now gradually transform into full-fledged dealerships of one or the other brand.
Besides these, Tata also has 70 stand alone dealers in the country.
The Italian company said all dealers would be given a chance to set up independent Fiat showrooms.
Though the tie up was expected to leverage the strengths of the two companies and forge a formidable alliance, it has failed to meet those expectations as Fiat customers regularly complained of sales and service hassles at the dealerships.
"We received feedback from our customers that they have not got the kind of experience that Fiat is known for globally and there was a need for a restructuring at the front-end," said a Fiat spokesperson. "With so many cars and variants and Tata and Fiat cars displayed next to each other under the same roof, there was a lot of congestion within the showrooms."
The newly formed sales and distribution company would come into effect shortly and would be headed by Enrico Atanasio, senior vice president, commercial operations, Fiat India Automobile Ltd. The company did not give out any details of how many dealerships it would set up this year.
"We will act fast now as India is an important market and there will be no inconvenience to our existing customers," the spokesperson added. "The expansion would be rapid but in a phased manner."
The company's factory at Renjangaon near Pune has a capacity of 1600,000 cars and 3,33,000 engines. It makes both Fiat and Tata cars.