The launch of the Fiat Stile at Ranjangaon in early April is a significant step in the collaboration between Tata Motors and Fiat, both of which first announced a MoU way back in September 2005.
Then after both partners announced a dealer-sharing initiative at the Auto Expo last year that involved 28 dealers including just three Fiat dealers who would retail both Tata-branded and Fiat branded cars.
Last July, both partners announced that an investment of Rs 4,000 crore would be made at Ranjangaon, a facility that Fiat India was only using for dealer training purposes. Fiat's facility in central Mumbai has since been shut, an estimated 700 workers accepted a VRS and for the company, whose chequered history in India began with the Premier Padmini, under the aegis of Premier Automobiles and later the launch of world car Palio, this marks an important phase. The 50-50 joint venture was announced last December to manufacture both passenger cars and engines.
The Palio Stile is the maiden offering from Fiat since the company teamed up with Tata Motors and will be the third product to be launched at the joint dealerships which had been earlier retailing the Palio and the Adventure Sports.
The Stile comes in two engine options - 1.1 litres and 1.6 litres, both petrol-powered that will retail at Rs 3.49 lakh and Rs 4.31 lakh, ex-showroom, Delhi. It will compete with the key B segment players such as the Santro, Indica and the Wagon R, all hatchbacks that have been able to carve out significant marketshares. At present, he local content in the Stile is 70 percent, and is likely to go up eventually, said Managing Director, Fiat India Automobiles, Giovanni de Filippis.
Speaking to Auto Monitor, Director, Sales Extra Europe & Importers, Fiat Group, Massimo Farao explained that, " With Tata Motors as the partner, we will be using the best of Tata and the best of Fiat on the Indian market. We will launch the Grande Punto that has been a great success story in Western Europe and the Fiat Linea that has been introduced in Istanbul few months ago.' Fiat plans to launch the Grande Punto by mid-2008.
Greenfield site
The Ranjangaon facility, which marks the first chapter of a momentous joint venture between Fiat and Tata Motors will produce around 100,000 cars from Tata Motors and Fiat and 200,000 powertrains.. The cars would be sold through 63 Tata-Fiat dealership covering 42 cities.
'The Tata-Fiat alliance has to be seen in holistic manner, as this is just one part of the whole picture that is going to emerge,' said Managing Director, Tata Motors, Ravi Kant said during the inauguration of Tata-Fiat facility. Senior Vice President Manufacturing, Fiat Group, Stephen Ketter, who was also present on the occasion, said the two manufacturers are looking at various opportunities in cars and powertrains and that new facility would play a crucial role in the overall gameplan. The decision to shift company's production facility from Kurla to Ranjangaon is based on the objective of achieving cost efficiencies, he added.
The Tata-Fiat facility would also spawn vendor development in Ranjangaon, which so far has remained underutilised with a token presence of few auto component manufacturers. The facility would pave way not only for domestic component manufacturers but also several big Italian manufacturers. Reportedly, in the past few months, several MoUs have been signed between the Italian companies and the Maharashtra government.
Access to technology
While for Fiat it means reviving the India fortunes, through the after and distribution network of Tata Motors, the JV will give Tata Motors access to world's best powertrain technology and thereby improvement in the quality of its passenger car offerings offerings.
Analysts feel with the introduction of the Logan from Mahindra-Renault, which has been competitively priced at Rs 4,27,950 (ex-showroom, Mumbai) and positioned as a wide-bodied car in the upper B and lower C segment could impact the Indigo. Tata Motors has begun working on new platforms for its current range and it is plausible to assume that it would tap Fiat experience in this regard. In the light of the increasing competition in the B and C segment, which is growing at the rate of 17 percent and accounts for 78,000 units of the total cars sold, synergies between both players will be leveraged.
The Tata-Fiat alliance will also open up new vistas for Fiat's powertrain business. Fiat's powertrain business was given a fillip in 2005 when Fiat Auto SpA, with a view to capitalise on one of its crucial advantages in the European market, brought its vast array of passenger and commercial-vehicle powertrain units under one roof - Fiat Powertrain Technologies.
The objective of the restructuring was to sell Fiat's powertrain systems to other automakers throughout the world and build revenue.
The new unit will focus on the diesel engine business, which has been growing at a much faster pace than the overall new car sales. At a time when most of the carmakers in India are pursuing the diesel agenda aggressively, a powertrain facility will play a crucial role.
Whether the Tata-Fiat alliance would catapult Tata Motors and Fiat's position in the Indian car market remains to be seen as the devil lies in the fine print. What would be interesting to watch out is how the two partners brings leverage upon the synergies and complement each other in core areas such as design, engineering, sales, distribution, etc.
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