Fiat hasn’t been able to wet its beak in the Indian automobile boom. It is now betting on the new revved up Linea to spruce up sales
Fiat’s journey in India has seen several bends in the road. Boxy Padminis gave way to the Palio and Uno, which were replaced by the Linea and Grande Punto. The Italian car maker now partners with Tata Motors for its Indian operations. It has come out with cars that look curvy and contemporary. Tata Motors dealers double as Fiat sale and service centres. The price tags on its cars are competitive and its ads popular. Yet Fiat hasn’t set the pulse racing.
Rivals say Fiat perhaps needs to work a little more on its cars. The numbers indeed suggest that Fiat has been unable to wet its beak in the
Indian automobile boom. It sold 10,213 Grande Puntos, Palios and Lineas in April to August 2010, a tad below 10,326 sold in the same five-month period of 2009. In the period, these segments grew 27-40 per cent, according to the Society of Indian Automobile Manufacturers.
The joint venture with Tata Motors, called Fiat India Automobiles, is in the red. It reported a loss of '970.7 crore in 2009-10, an increase of 39 per cent over 2008-09. (Tata Motors claimed a profit of '22 crore in the first quarter of 2010-11 against a loss of '166 crore in the year-ago quarter). The company had pumped in '4,000 crore in a brand new factory at Ranjangaon near Pune. In 2007, Fiat had said that it would hit peak production of 100,000 cars by 2010. Last year, Fiat made 24,000 cars in the lines that can make 70,000 cars in a year — the rest were used to make the Indica Vista and Indigo Manza. Fiat is still a long way off from achieving the target.
Fiat India Automobiles President & Chief Executive Officer Rajeev Kapoor plays down the numbers. “There had to be some evolution because it is a new business model that we were trying. How else would we get a jumpstart from 65 dealers to almost 200 in a year’s time?” That’s reasonable. But a Plan B needs to be activated soon if Fiat wants to stay in the reckoning in the Indian car market. There is every indication that rivals are all set to hit the accelerator in the days to come. Japanese powerhouses Toyota and Honda are ready to enter the mass segment, and others like Volkswagen, Nissan and Hyundai too have drawn up aggressive plans.
Tata Motors Managing Director Carl-Peter Forster had earlier told Business Standard that the venture with Fiat will look at more products to strengthen the brand. At the moment, the company’s efforts seem to be geared towards improving the current portfolio — the Grande Punto hatchback and Linea sedan. It aims to double its production to 40,000 by this year-end. The Linea is central to its scheme of things.
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Linea(r) growth
The Linea competes in the C segment (also known as the executive segment) with the likes of the Honda City, Ford Fiesta, Maruti Suzuki SX4 and Hyundai Verna. When launched, it had a diesel engine which used advanced multijet as well as a 1,368 cc petrol fully-integrated robotised engine (FIRE). The market leader, the Honda City, has a petrol engine only, and yet lords it over 60 per cent of the market. Almost 70 per cent cars sold in the category are fitted with a petrol engine. The message is unambiguous: Car buyers in this category prefer petrol engines for better driving experience.
Automotive analysts say FIRE was underpowered. For instance, at traffic signals it did not give the pickup that Indians desire. Fiat is aware of the problem. Thus, a new Turbojet engine will replace FIRE. With the new engine under the bonnet, the Linea promises to have everything its predecessor did not: Improved torque and power as well as fuel efficiency. The new Linea, Fiat claims, will run 14.6 km on a litre of petrol, and will hit a speed of 100 km per hour from scratch in 11.4 seconds. Honda City has been tested for 13 km on a litre but hits 100 km per hour in 10.59 seconds. Compared to a mere 86 bhp of power and 115 Newton-metres (NM) of torque of FIRE, the new engine delivers 114 bhp and 207 NM. The 1497cc i-VTEC-powered City in comparison generates maximum torque of 146 NM and 116.3 bhp of power.
Apart from the engine, Fiat got a lot of complaints about the interiors which were often tacky, and were made of plastic components that came off loose when touched. The company has worked on the interiors with chrome accents and better-fitted interiors. Air-conditioning that had become another bone of contention too has been revved up.
Some experts question the wisdom of betting too heavily on the Linea. A bigger, and faster-growing, segment is the one in which Grande Punto operates — the A2 category. But it has well-entrenched players like Maruti Suzuki (the Swift hatchback and D’Zire sedan), Nissan, Volkswagen (the Polo hatchback and Vento sedan). Soon there will be Toyota with the Etios (hatchback as well as sedan). Fiat launched a more powerful 90 bhp Grande Punto early this year to brace for the onslaught.
Reaching the buyer
In the last one year, Fiat has seen the flipside of riding piggyback on another car maker’s dealer network, observers point out. Its cars, though a little short on features, were competitively priced. Still, Fiat was unable to find its mojo in the Indian market. The volumes remained low. For the dealers, stocking Fiat inventory or retaining staff became a chore. It was no better at the service centres.
Fiat knows it needs to get its act right. For a car with the first Turbojet petrol engine in this segment, the Linea will be Fiat’s premium offering and the retail experience has to be brought at par. When the partnership was forged, both the companies were clear that the two brands would be clearly differentiated at the stores. Fiat India Automobiles Marketing Head Tarun Khanna says: “At the beginning, the Fiat sections looked premium with dedicated people. But over a period of time we needed to rehire and then retrain the new people. We had to find a way to stay ahead of the churn.” With the help of Accenture, and its own internal team, it has now overhauled its sales and after-sales processes.
The Fiat bay in Tata-Fiat showrooms will flaunt a new lounge look, complete with intensively-trained product specialists and hostesses who will serve Italian coffee. Those raring for a test drive will be taken on a pre-determined route that will accentuate Linea Turbojet’s performance and power. Behind this unique touch has gone a lot of homework. Test drives of Fiat cars were fraught with delays earlier — appointments were not kept or the test vehicle would not be available at the dealers. “The entire test module has been defined from end to end,” says Khanna. Fiat has laid down the number of test cars needed at each dealer based on the catchment area and the frequency of inquiries, the number of test drives each car might have to do, the test drive routes for each dealer and the feedback format. Its field managers will audit the test drive cars every week to ensure they are fighting fit for the next test driver. “The audits will do away with situations where a test-drive car would be languishing in the workshop, while prospective customers wait to drive it,” adds Khanna.
Fiat has also lined up a follow-up service once a Linea is sold. In a survey of sales satisfaction, it found that one of its dealers in the Nashik belt scored the highest over three quarters. A closer look revealed that the dealer sent a bottle of wine to every Linea customer. “The wine bottle was not significant for its own sake; it was important because of the sense of reaching out to the consumer even after the deal was sealed,” points out Khanna. All Linea customers will now get a knock on their door a couple of days after their purchase with a complimentary wine bottle and a specialist seeking feedback.
Looking to grow its distribution from 170 outlets to 200 by this year-end, the retail revamp will play a vital part. But it still is an experiment. The dealers have to be won over. Khanna points out: “Traditionally, they are not known to offer premium salaries or maintaining the quality of the test drive car. But if they see these new measures paying off, then they would definitely invest more.” To reinforce the confidence, Fiat is bearing the initial investment for the refurbishing and training during the launch phase.
Two at a time
It has helped that Fiat decided to address the two places which account for half the sales first. One of every two cars in the C segment gets sold in the two areas of Mumbai & Pune and the National Capital Region of Delhi. To manage its cost of overhauling the showrooms and also release a concentrated communication campaign around the Turbojet engine, Fiat will launch in these two markets for the first eight weeks. Cities like Bangalore, Chandigarh, Chennai and Hyderabad could follow after that. “We have a new product, communication and even a new showroom experience. Before going pan-India, we need to know what is paying off and what can’t be adapted to other markets. In Chennai, for example, out-of-home might not work as in Mumbai and television might be the answer, while in Bangalore it could be display in malls and corporate hubs,” thinks Khanna. Fiat has upped its marketing budget three times for the communication blitzkrieg in these two zones. Television ads, outdoor displays and large format print ads will declare the new Turbojet Linea.
The redrawing of the Fiat experience will also be bolstered by its improved supply chain and spare parts availability. The Indian plant now has a 14 per cent cost advantage over its manufacturing facilities in Brazil and Turkey because of localised sourcing which has gone up from 65 per cent to 80 per cent in the last one year. A new warehouse with electronic tracking has ensured parts are available for dispatch 85-90 per cent of the times when an order is placed, up from 70 per cent. The company will also offer more value for Fiat exchanges in an effort to put to rest the need to procure parts of the Uno, Petra and Sienna which have to be brought in from other countries.
Will this be enough in the fiercely-contested market? “Fiat has been in and out of India; so its brand could have taken a beating as a result. It is not seen as strong as General Motors or Ford,” says Ernst & Young Partner Rakesh Batra. Dependence on just two products is hampering its chances at the market place.