Fiat sales accelerate after Tata agreement

After witnessing a drastic slump in sales for three consecutive years (2003-5), Fiat's collaboration with the Tatas is bearing rich dividends.

In the 2006 calendar year (Jan-Dec), Fiat's total sales grew 28 per cent to 2,115 units, as against 1,649 in calendar 2005. The growth looks attractive given that the company saw a 75 per cent fall in sales in 2005 over 2004.

The Tata tie-up with Fiat was signed in January 2006 under which the two companies decided to share their domestic dealership network.

If the figures for the first two months of 2007 are anything to go by, Fiat sales went up nearly threefold in January-February 2007 (215 vehicles) over the corresponding period last year.

Of course, Fiat dealers admit that they have been giving discounts of up to Rs 50,000 on the Palio to clear their stocks, as plans are afoot to launch in the first week of April a new version of the car, which will be fired by a 1100 cc engine. The other models include Adventure and the Petra.

Disadvantaged by poor service back-up, maintenance woes and low market penetration, Fiat Auto India's sales had earlier dipped, which made it tie up with Tata Motors, India's largest automobile manufacturer.

Under the agreement, Tata brought its 25 dealerships, with their showrooms, to also sell Fiat products. At present, there are 41 dealership outlets and 19 more will come up soon, raising the total number to 60 outlets. Fiat has about 40 dealers, raising the total number of dealerships available to the two companies to about 100.

Amit Kasat, senior analyst, Motilal Ostwal said, "The JV has been one of the best of recent times because it puts both companies in a win-win situation.

The alliance will pull Fiat out from its red balance sheet and make it a profit generating company." Of course, with a market share of less than 1 per cent in India, it has a long way to go.

The joint dealership initiative has helped Fiat not only maximise sales but also improve its spare part distribution and vehicle service networks.