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Fiat wakes up. Now with Chrysler

Fiat needs mass market cars from its brand. And it needs them quick. Other multinational companies have upped their game in India. This is the last chance for Fiat

Ashish K Mishra
Published: 07, Dec 2012

Former senior principal correspondent at Forbes (India). Since 2008, I have been writing on corporate strategy in the automobiles, clean technology and supply chain space. Before I got onto this assignment, I was part of the team that covered feature articles at The Economic Times. I actually started out as a trainee journalist on the ET desk in 2006. I graduated in commerce from Shri Ram College of Commerce in New Delhi and now live in Mumbai. I love automobiles and spend hours reading up on them and then devote painfully long hours to work on old cars that attract my fancy. Right now I own four cars (my colleagues call them fancy, junk or whatever) and a bicycle which outside my work hours get most of my attention.


Yesterday Fiat announced its new roadmap for India. At the press conference, Enrico Atanasio, Fiat's India managing director said, "We are optimistic about our prospect for growth in the Indian car market, which grew 12 percent in 2011 and is rapidly becoming one of the major markets in the world. With the launch of the Jeep brand, new Fiat products, an expanding dealer network and upcoming marketing initiatives, we will be in a strong position to capitalize on this growth.”

Except that for people following this sector, this announcement comes as no surprise. In the last decade alone, Fiat has said it twice that it is going to get its act together in India. But none of those announcements have borne fruit.

Let’s look at where Fiat India stands today. The company sells just under 600 cars every month. That’s a very low number for the 7th largest car company in the world in the 5th largest automobile market in the world. To put things in perspective, other multinational companies which have seen far less of India, like Volkswagen and Renault-Nissan among others are doing more than 5 times Fiat’s volumes. So yes, things are bad at Fiat.

A quick recap: so it has happened after Fiat bungled its partnership with Premier Automobile group back in the 1990s. It happened after they came in all alone in the late 1990s and soon exited the market. It happened after Fiat found a new partner in Tata Motors way back in 2005. And now it is happening all over again in 2012 when Fiat wants you to believe that Chrysler, the US auto maker that Fiat Group bought a couple of years back will play the rescue act in India. At the press conference today, Enrico Atanasio, managing director of Fiat India said, “We are at a much lower level today. But we know that we have a long way to go.”

Let us get to the most important points of this new roadmap.

1. Fiat says it is a company in a transition phase. They will spend a good amount of time in setting up their own distribution channel in terms of dealerships and service outlets. Which means you won’t see any more of Tata Motors. To quote Atanasio, Fiat will offer you a real Italian experience into the car world. Their target is to set up 120 independent dealers by 2013. 2. Fiat wants to increase its market share from a paltry 0.7 percent today to 5 percent in 2016. Tarandeep Singh, principal at Boston Consultancy Group says this number looks ambitious. “To reach there, Fiat will have to fight multiple competitors looking at 5 to 10 percent share,” he adds.
3. Fiat will be launching two new brands from the group; Chrysler and Abarth.
4. As a part of this growth strategy Chrysler will launch the Wrangler and the Grand Cherokee sports utility vehicles in 2013. Two other SUVs will be launched from the Jeep stable in 2015 and 2016. Most likely they will have very little localization levels and will be sold through Fiat’s distribution network.
5. Fiat will launch a car called Linea Classic in 2013. A new Grande Punto and a new Linea in 2014.

Jeep Wrangler

My sense is this roadmap doesn’t have much to offer. Here’s why.

Fiat’s current crop of cars, the Grande Punto and the Linea are not selling. In 2012, Fiat should have sold about 9, 000 cars in a market of 2.6 million vehicles. Now if they have to increase their market share to 5 percent by 2016, here’s the number of vehicles they will need to sell. The Indian automobile market in 2016 is expected to be about 3.7 million vehicles. 5 percent of that number is 1, 80, 000 vehicles. Yes. From 9, 000 to 1, 80, 000 in 4 years is a very big climb. Let’s understand why.

In India, more than 50 percent of the market is still made up of small cars. That’s where Maruti Suzuki and Hyundai are strong players. Fiat doesn’t have a single small car in its product pipeline till 2016. “The only way Fiat can make a comeback is by offering a car below the Grande Punto. Because if you look at it then they have already lowered the price of the Linea to a great extent and perhaps are losing money on it,” says Deepesh Rathore, managing director of IHS, an automotive consultancy firm.

The Jeep is not a mass market vehicle. There is no doubt that it is the world’s most well regarded SUV. Mike Manley, the COO for Asia and the president and COO of the Jeep brand had all the right words for the Jeep; styling, functionality, capability and extreme off road. What it will get Fiat is the halo brand effect. “From a strategy point of view, this is the right message. Some bit of the Chrysler image will rub on to Fiat,” adds Ghai.

But it will not get you the numbers. That’s because it will be launched in a segment and at a price range where it will compete with the premium car makers – like BMW, Audi, Mercedes and Land Rover. Despite the fact that the SUV market in India grew at a rate of 17 percent last year, in actual volume terms the segment is small. As of today, not more than 3, 000 cars per year. Experts believe that there is not much that Fiat can do in the localization department either. There is little chance that the 3 liter diesel engine (for the Jeep) will be made out of Fiat’s current facility in Ranjangaon, Pune.

So this is where the new roadmap falls flat. Fiat needs mass market cars from the Fiat brand. And it needs them quick. That’s because other multinational companies have upped their game here. Right from Ford to Honda. Rathore says that is the last chance for Fiat. “If they don’t make it this time, then they will find it extremely difficult to come back,” he adds. Unless of course there is a partnership with a major car maker in India in the future.

  • R.Dowerah.

    FIAT INDIA must think to improve service of their old models to gain customers confidence .

    on Feb 19, 2013

    It is nice that Fiat has opened their eyes very late. No doubt the engine, look and comfort are much better than any other cars. I have a Linea and Punto. When considering the service no doubt the most useless in the Indian market. The present trend is that if anybody buy a Fiat car another car is to be given free of cost. That is to be kept as a standby. If the car is going for any service to any of the service centre in India, for want of spares etc. it will not be available for at least 8 to 10 days. Only option is to hire another vehicle or use the standby. In my friends circle at least 20 persons have changed their mind to go for another car from Fiat after seeing my sufferings. I firmly believe Fiat is a closed chapter in India. Let it RIP.

    on Dec 25, 2012
  • Sudharsan G

    I think once again Fiat is making a mistake by briging JEEP in to the current indian market as their primary strategy to sell the Punto & Linea and moreover i dont think this will create a buzz in the buyers mind. The good news here is Fiats independent dealershiop & service centers which was the main concern for the Fiat car owners. Instead of launching JEEP in to the indian market they should first implement the below strategy: 1. Bring 1.0 Litre diesel engine with powerful & fuel efficency of min 25KMPL below Punto segment. 2. 1.2 Litre petrol in Punto which can produce min 75hp power & fuel efficinecy in the range of 18KMPL. (Current 1.2 FIRE is hopeless & pathetic) 3.1.6 Litre multi air diesel engine in Linea with power delivery at par with Vento /Rapid/Verna. 4.Change the dull interior & silver center console to bright & attractive metallic console. Even though Fiat cars has got amazing external look interiors are not impressive to attract the buyers. Unless they implement the said changes they can not compete with any auto company in india though they come up with italian style cafe, showrooms,service stations, etc. etc., What i understand is Fiat is trying to show Indians in their new strategy that they are big compnay in the world and not intrested to sell the great cars they make.

    on Dec 12, 2012
  • daljeet

    in my view suv segment may not be volume business but naturally make change of image of fiat india

    on Dec 12, 2012
  • Mohammad Chowdhury

    Can't we persuade Fiat to start selling the Alfa Giulietta in India? There's probably no business sense in the idea, but boy would it look good on Marine Drive!

    on Dec 8, 2012
  • akshat

    small car is the key... i agree with you

    on Dec 7, 2012
  • KD

    I also agree to the facts highlighted above, numbers can be achieved by targeting the masses, not premium segment, JEEP would be falling under the premium segment because of high import cost on CBU basis. Agressive product pricing would be the key for achieving it. Fiat firstly should catch hold to its existing products Punto and Linea to make them acceptable to the masses, Stregthen their dealer network first, show their after sales support and service, which is the key put off for the FIAT customers. Introduce Linea and Punto 1.3 Multijet diesel with multiair DIESEL technology to increase their power outputs without effecting it fuel consumption and current pricing structure. It will do the wonders for Fiat. As people in India love powerful cars with low fuel effieciency simultaneously and offcourse with good pricing ranges between 550k to 1000k.

    on Dec 7, 2012
  • Krishna

    I agree with most of the points mentioned in the road map's in ability to offer. 1. The 1,80,000 numbers they will get if they begin take all their old customer's problems seriously and attend them. The number will only go up if their customers return back to them for a new car. No customer will go back to Fiat if they feel they made a big mistake by buying a Fiat. Their new service points surprisingly omit all their old models they sold in this country to date! What makes a person happy that the car purchased by him will be serviced after a few years? Fiat has practically no repeat buyers! There is no word of mouth that tell other person to buy a new Fiat! I do not feel like buying another Fiat unless the feeling of mistake is erased from my mind! 2. As mentioned, the only car that can compete with Santro or M-800 or Alto or A-Star is Palio and they just removed from the line. They just introduced the Palio Stile 1.1 (although sluggish and it has its own problems), they could have sustained and refined to Indian conditions and then the numbers might have looked better. I think Fiat failed in all the three essential areas viz. service, strategy and customer loyalty. The future of Fiat in India will be no good, unless they begin to attend the all existing owners with loyalty, for every new potential buyer of Fiat, it has 9 disappointed owners! This has to change.

    on Dec 7, 2012
    • SUJIT

      Fiat making new strategy mix should focus on positioning / Re branding than anything else. Already, the Loyalty factor is missing for maximum numbers of buyers, coupled with failure of performance in the Indian make road and it's service depending on TML have eroded the confidence of niche buyers. Unlike the European market, the ad campaign to the Indian mass to be focused on all the segments for their new USP and deliverable s. Indian market is still open to competition and competitive market Price.

      on Dec 11, 2012
  • Devara

    Fiat engines are good but they are very bad at vehicle body quality, fittings and servicing. They provide different tire size for the same vehicle where ground clearance is less. I am using Fiat Linea from last 1 year. Spares availability is bad, Time to rectify problem is bad and some time problems are not solved even after x complaints. Fiat Engines are the Best- Only one positive point to consider fiat.

    on Dec 7, 2012
    • R S RAJAN

      I do agree with you about the good engine and poor service. Repeated failures are common phenomenon. My Fiat Linea is 3 years old and lost the confidence of its reliability. I loved and maintained the car in such a manner. But the service centre has deceived me and for attending a mechanical failure the vehicle is in the service centre for the past 8 days. Still the problems are not resolved. Customer care centre is not responding to our complaints. At last I have decided to take a new vehicle of another make. Say Good bye to Fiat Motors.

      on Dec 25, 2012
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