A REPORT

ON Strategic Outlook for Fiat India Automobiles Ltd.

By Abhishek Bhardwaj 0901200065

ICFAI Business School

Dehradun Date of Submission: 7th March. IBS. By Abhishek Bhardwaj 0901200065 A report submitted in partial fulfillment of the requirements of MBA program of the ICFAI University.A REPORT ON Strategic Outlook for Fiat India Automobiles Ltd. Ashwini Sovani. 2011. SUBMITTED TO: Prof. Pune .

I express my sincere thanks to him who guided me throughout the project and gave me valuable suggestions and encouragement for my continuous improvement. .Acknowledgment Through this acknowledgement. Dhananjay Keskar (Director. Ashwini Sovani (Faculty.Prof. this project would not have shaped up so beautifully. I am highly indebted to him for the all guidance and support. I express my sincere gratitude towards all those people who have helped me in the preparation of this project. which has been a learning experience. I owe my special thanks to my family & friends who are my source of encouragement and inspiration and without their help and support. I wish to thank them for the entire morale boost that they gave in times of need. IBS PUNE) for her continuous support and time. IBS Pune) for providing me an opportunity to study in this esteemed institute and go through the rigorous MBA program of 2 years. I am highly obliged to Prof. Finally. He has been a guiding spirit all throughout this project and has given all the information which made it possible for me to make this project. I wish to thank my Faculty Guide.

Table of Contents I. III. II. Abstract Introduction Report References . IV.

The innovation strategy fuelled the company's diversification plans into agricultural and construction equipment. Credited as one of the founders of the European automobile industry. launched in September 2001. publishing and communications and insurance.' Uno.000 worth of content more than the Santro. One should be able to understand the rationale behind the measures taken by the company for ensuring the success of its various cars. not only in Italy. metallurgical products. launched by FIAT in 1983.334 million respectively. Italy by a group of individual investors. Grande Punto and Linea cars a success. Fiat signed an agreement with PAL to import and assemble CKD kits of the 999cc car 'Uno. Fiat claimed that it offered a net Rs 26. commercial vehicles. It examines in detail the company's efforts to make its Uno. This prompted Fiat to increase the daily production at its Kurla plant in October 2001. In March 1996. Four versions of the Palio were launched in September 2001. In just two days.Abstract The report explores reasons for the poor performance of the Italian automobile company Fiat in India. but also internationally. Over the next century. the Palio.349 million to Rs 0.349 million and Rs 0.499 million. Fabbrica Italiana Automobili Torino (FIAT) SpA was established in 1899 in Turin. Palio. production systems. FIAT's automobiles achieved instant popularity. Analysts remarked that these models were priced competitively against the Santro and the Zen. The entry-level models of the Palio (EL) and the Santro cost Rs 0. The report also takes a look at the changes made by the company for ensuring the success of its car. over 1100 cars were sold. The market seemed to agree with Fiat as the car was received rather well. "While daily production at the Kurla plant has already been increased from 50 to 70 cars a day. we plan to increase it further to 100 cars a day by midOctober and 150 by November-December. Sienna. product development and the strategic alliance fronts resulted in Fiat's poor performance over the years in the Indian car market. The report is so structured as to enable one to understand how certain mistakes on the marketing. FIAT consistently followed a two-pronged growth strategy: penetration of foreign markets and focus on innovation. the prices ranged from Rs 0. aviation. components." The company was also planning to add a third shift and produce 220 cars a day. Bianchi said. was the most successful car in the company's history. .

and is making world-class cars available in India at even more competitive and affordable prices. the Ferrari. . The Launch of Palio History  The history of Fiat began many years ago. It is also the only company in the world that manufacturer¶s recyclable car. the company was established in 1905. mobility solution to the customer. In India. including the Fiat Lancia. Fiat had a market share in Italy of 80%. Fiat is the only automobile manufacturer in the world that has won the coveted European Car of the Year award nine times. Fiat has achieved a high level of localisation for all its cars. the Maserati and the Alfa Romeo. as Bombay Motor Cars Agency as its sales agent. and had a 697 cc boxer twin engine.  By the early 1920s.´ . deliver.  In 1910.  Giovanni Agnelli founded Fiat in 1899 with several investors. finance. service. in October 2001. Fiat Automobiles owns the most-admired and sought-after models worldwide. In 1922. at the dawn of Italian industrialization. Managing Director (Fiat India).  Its first car the 3 ½ CV strongly resembled contemporary Benz. cost. to manufacturing and selling of 1100 and 1100D Fiat Padmini cars. Fiat was the largest automotive company in Italy. Fiat began to build the famous Lingotto car factory the largest in Europe up to that time which opened in 1923. Fiat Automobiles signed a licence and servicing contract with Premier Automobiles Ltd.Introduction ³We will show what Fiat means.Maurizio Paolo Bianchi. in terms of technology.

Despite having some highly competitive cars in its India portfolio. the sales figures of the company remain moderate. Fiat Punto The company currently sells two fairly competitive cars in India including hatchback Fiat Punto and sedan Fiat Linea but has managed to sell mere 24. both of which are available in petrol and diesel engine options. As per the industry experts. The company currently sells its cars in India through 175 Tata Motors dealerships which is a 50:50 joint venture partner of Fiat in India. its market share is still mere 1. Iveco. Case New Holland (CNH) and Fiat Auto are presently the major customers. this captive knowledge can help us to successfully approach and manage new customers.5 million units during the same period." as Iveco. Centro Ricerche Fiat and Elasis. FPT is capitalizing on the technological excellence of Fiat engines and transmissions to approach the open market. creation of separate sales teams dedicated to its different car to make sure that a single model can be pin-pointed and sales can be improved. Where the company had reported a robust growth of 208 percent in the Indian market in FY 09-10. Rajeev Kapoor. From the very beginning. that the sales of Fiat India could have been better. Of course.806 units in the financial year 2009-10. the company is continuously working on reaching more and more customers in India by enhancing its dealership base and increasing its manufacturing facility in the country. the strategy of Fiat Powertrain Technologies has been to unify the innovation capabilities and technological expertise before spread among Fiat Auto. He further reiterated that the numbers could have been better. which is a very small number considering the total industry sales of 1. the performance of Fiat India during the last one year could have been better if it would have focused more on the sales and promotions of its under deserving cars like Fiat Punto and Linea in the Indian market. Through that strategy. However. . considering it has two competitive products (Linea and Punto). gaining and increasing shares through noncaptive customers.Report Fiat India has been mulling over to adopt a new marketing strategy for the Indian market. MD of Fiat's India.6 percent in the country. According to Mr. The new marketing strategy of the company includes. the base business and the starting point is "captive. This would indeed be a trendsetter in the Indian automobile industry. however.

but with its network tries to gather a portfolio of medium-sized OEMs evenly distributed in the various areas of the world. prioritizing areas that will give the company a global presence where it will structure the FPT presence by replicating the central structure. one of the largest OEMs belonging to the Fiat Group. application engineering and manufacturing demonstrating how FPT can work as one company. the Fiat Group is traditionally present and our strategy now is to consolidate and extend the former Iveco Motors network. This deal has been followed synergistically by Sales & Marketing.000 engines per year for the Canter light commercial vehicle of Mitsubishi Fuso. given both its size and the number and importance of its OEMs. based mainly on sales through the company's network of distributors and dealers. A special effort is also made in the Mediterranean coastal area where the current network of local shops will be improved to provide an even better assistance to FPT marinized engines that are powering both pleasure hulls an professional fishing boats. one of the first large contracts of strategic value for the new organization has been the Daimler/FPT agreement for the supply of 78. operating in the automotive. industrial and power generation market segments. On the KA side. thereby giving its global players multifunctional support to cover all their different needs. FPT North America has already established a network of local dealers and a decentralized R&D and Engineering Center is going to open in Burr Ridge. is considered the starting point to develop this approach. to assist local OEMs. In Europe. CNH. FPT's strategy of doubling its volumes by 2010 has been approached by Sales & Marketing by focusing its effort on the open market. structured to serve global OEMs directly with an internal sales force. . Established by Iveco-Aifo and Iveco Motors.The open market business is implemented on two parallel channels. near Chicago. growing the penetration especially in the Eastern European countries. North America is another marketplace of strategic interest. As mentioned. the FPT approach is not restricted to a limited number of large customers. The second path to market is through the KA channels. this retail channel is able to sell tailored engines to small OEMs. One is retail.

a growing group of Chinese OEMs of off-highway machines that are distributed in the domestic Chinese markets. This plant is sized for the production of 100000 engines per year to be distributed through three different channels. which are served through the Shanghai hub. China. Fiat India Automobiles Limited (Fiat) held a lavish function in the Indian coastal state of Goa. Designed by well-known Italian automobile designer Giorgetto Giugiaro. the market leader in the Indian manufacturer for India. a similar deal is in the advanced planning stage with a local player. near Belo Horizonte that enables the group to be a market leader in the automotive sector. SAIC and Chongching for the construction of an engine manufacturing plant in the Chongching industrial area. A similar deal was concluded in November 2006. the Palio. The function. Iveco and CNH. with Iveco. FPT is benefitting from this industrial footprint to produce industrial diesel engines of the Nef and of Cursor families. Finally in Russia. protected by high import duties. The main challenge in these countries. the joint venture is not signed. At the time of writing. and for export to the rest of the Far East and Australia. That led FPT to produce industrial engines in Pune for both Tata and also to serve Indian OEMs producing agricultural and construction machinery. while gearboxes and axles are produced in Cordoba. These include the two Fiat Group companies already well established in China.1 the Palio was already a huge success in countries like Brazil and Argentina. but the agreement should be concluded within the first half of 2008. featuring performances by leading Indian musicians Louis Banks and Sivamani. India and the Far East are the fastest developing countries in the world and FPT decided to be present there through a joint venture with Tata.In Latin America the situation is different. is to produce engines with high local content in order to satisfy OEM needs through local production. The engine production pole will serve the growing group of Russian OEMs mainly dedicated to develop mobile equipment for the internal Russian marketplace. as the Fiat Group also has a large footprint in Betim. as well as generating sets. was held to celebrate the launch of Fiat's much-awaited car. The Launch of Palio In September 2001. . who had composed music especially for this event.

part car) for the time being. Fiat's market share in 2001 was only 1. Unlike some of the other small cars that had been adapted to suit tough driving conditions in India.000 Palios during the first year of its launch. Known as the Fiat Group's 'world car'. Siena and Siena Weekend .3%. his skeptics far outnumbered his supporters." Fiat had also postponed the launch of the Multipla (part van. The company had invested an additional $ 250 million at its Kurla. It was reported that the company was ready to stop producing the Uno completely.9 diesel (version). Instead. In this way we will be able to span the complete spectrum of the B-segment which today accounts for 40% of the Indian market. . "With the Palio we plan to give the widest range possible in the B-segment.2 Fiat did appear to be taking a 'last chance' with this new car. The Palio was expected to boost the company's sales. We will also try to give a wide range of options to suit every pocket and taste.6-liter petrol (versions) and by 2003 offer a 1.000 per year. plant for the new car.The media termed the high-profile launch of Palio. Fiat had even decided to reduce the combined production of its other models . The reasons were not difficult to understand.Uno. Company sources revealed. as the company's five decade long existence in the Indian automobile market had only produced failures.3 We will launch with the 1. backed by a Rs 120 million endorsement deal with leading Indian cricket player Sachin Tendulkar (Tendulkar). "The decision regarding whether the Uno should be continued will be taken after the Palio is launched and after observing the performance of the former car. In spite of having invested over Rs 30. if necessary.2 and 1. Maharashtra. as a desperate attempt by the Italian automobile giant to establish itself as a serious contender in the Indian car market. which had been declining for the past few years.to 10. the Palio had been designed from scratch with these conditions in mind. the Palio was being seen as Fiat's last chance to tackle its accumulated losses of Rs 10 billion. It had dedicated more than 83% of its total installed capacity for the production of the Palio. Fiat India's Managing Director Maurizio Bianchi was extremely optimistic regarding Palio's prospects.1 billion since 1996 in the country." Although Bianchi was optimistic. the company planned to build 50.

Uno was launched in 1996.00.The Failed Resuscitation Attempts UNO In March 1996.000 bookings in just three months. The lockout was lifted in November 1996. was the most successful car in the company's history. The non-delivery of the vehicles upset many consumers and around three-fourths of the orders were cancelled. Fiat signed an agreement with PAL to import and assemble CKD kits of the 999cc car 'Uno. production suffered greatly and the company could not deliver the booked vehicles in time . However.' Uno. As a result of the lockout.only 617 cars were delivered by the end of 1996. . late Datta Samant. launched by FIAT in 1983. after a majority of the workforce defied the Datta Samant-led union and opted to go back to work. the employee union at the Kurla plant forced a lockout. The lockout was the result of a go-slow agitation led by militant trade union leader. started in April 1996. in June 1996. amidst much fanfare and acquired around 3. just when the company had closed the bookings.

"This is the beginning of what promises to be a far-reaching. Senegal. Turkey. In the 1950s. the Fiat ." . because of a fall in the demand for commercial vehicles. TM was mostly a manufacturer of commercial vehicles. it had a market presence in Thailand. TM returned to profitability. (Fiat Auto). Fiat Auto. Until the 1990s. TM reported a loss. "While Tata Motors will get technology to develop economically priced small cars and entry-level sedans and an entry into untapped markets. in spite of its impressive growth. By 2005. The joint venture was seen as a major development in the Indian automobile industry. and later on in Europe. Chairman. After World War II. Fiat Auto dominated the small car market in Europe and other parts of the world. also had an illustrious history in the automobile world.A. major Italian automaker Fiat Auto S.p. However.Ratan Tata. in January 2006. which built its first car in 1899. signed a Memorandum of Understanding (MoU) to form a joint venture to produce passenger cars. It entered the passenger car market in the 1990s with the Indica. Europe. and the Indian auto major Tata Motors (TM).5 In India. in 2006. TM was still a small player at the global level. Tata Motors. Auto analyst. and West Asia. Both TM and Fiat Auto had a long history in automobile manufacturing. it became a major manufacturer of small cars in Italy.3 in 2006. However. Fiat cars were imported even as far back as 1905.Kalpesh Parekh. the two companies had signed a marketing and distribution agreement under which TM marketed select models of Fiat cars through a few of its dealers. a 1400 cc small car44 with a diesel engine. engines. which went on to become a success and placed TM among the top three passenger vehicle manufacturers in India. In 2003. it improved its internal efficiencies and also decided to focus on overseas markets to reduce the impact of demand fluctuations in the domestic market. Until the 1990s. Fiat India can continue to have a presence in the Indian market without much investment. and transmissions in India." . These products were intended both for the Indian and the international market. Earlier. in 2002. ASK Raymond James. South Africa. As a part of its turnaround strategy. In July 2006. long-term relationship between Fiat and Tata.

but then it introduced cars under the brand of Peugeot and also launched the UNO. (PAL)6 to manufacture its cars. this created a panic. The first mistake that fiat made was in those times. In the early 2000s. That generation dint like the cars but still used it as there was no other option. Peugeot faced a lot of problems in its initial years of launch. in fact the brand image of fiat kept on deteriorating. INITIAL IMPRESSION OF PADMINI Fiat Padmini and Ambassador were the only cars available in India and the Indian consumers were really bored of those cars and wanted to be relieved of these cars.Group entered into a license agreement with India-based Premier Automobiles Ltd. it had the first mover advantage in the Indian market but it did not capitalize on it. RUMORS OF CLOSURE DURING RELAUNCH After Padmini¶s launch fiat didn¶t launch any car for years together. but after the bookings were done a rumor spread that fiat is winding up its operations in India and people¶s money would be lost. Peugeot got thousands of pre launch bookings in those times. . ugly cars. GENEARATION AHEAD OF ITS TIME The fiat CEO himself once admitted that they have been ahead of their times in a statement made ³we were generations ahead´. After 3-4 years of the Palio¶s launch cars like Swift and Getz in the same category were launched and have been successful. Fiat Auto ran into losses as it was slow in adapting to the changed economic environment7 in Italy in particular and Europe in general. The impression that it created in those times was that of a high maintenance. The impression it created in the early period carried on till a long period of time. They bet heavily on the success of Palio as a car. Fiat Auto formally entered the Indian market in 1997 through a joint venture with PAL. The consumers in India were totally fed up by fiat cars. which in fact was a success in the beginning but then couldn¶t continue for a longer period of time. this impression got carried to the next generation of users after 1991 when auto companies rushed through India and fiat became the un-preferred brand.

Fiat Auto decided to revive its operations in the Indian market. without heavy investments. 1997. And the joint venture with TM was a step in that direction. Also owns and controls five internationally renowned brands: . India being a major market for small cars.. especially the premium small car segment. M&M/Renault. it seemed likely that the TM-Fiat Auto joint venture would face intense competition in the coming years. design. chalking out plans to enter the small car segment. . Skoda. etc.1 and 1. and global markets. it would mean a larger presence in India. there were others who felt that the joint venture would end in brand dilution and product cannibalization for both parties. with Honda. However.6 models. one of the world's fastest growing auto markets. Nissan.Company Overview Fiat India Automobiles Private Limited (FIAPL) is a 50-50 Industrial Joint Venture between Fiat Group Automobiles and Tata Motors Limited originally incorporated on January 02. while for Fiat Auto. TM would gain in terms of better accessibility to technology. GM. premium Fiat cars such as the Grande Punto and Linea are expected to boost sales soon in the B and C segment from the facility within. Toyota. Most analysts were of the opinion that the joint venture would benefit both parties. Also. Abarth and Fiat Light Commercial Vehicles & Ferrari. Mitsubishi. Currently manufacturing the Palio Stile 1. Alfa Romeo Automobiles. Lancia Automobiles.Fiat Automobiles.

SWOT Analysis Strengths Expansion Of Business Services Maintain Position Understand Market Condition Flexible And Powerful Engines Weakness Customer Satisfaction Luggage Carrying Capacity High Prices Opportunities Enter Into New Line Of Product Technology Development And Innovation Threats Country To Country Policy Competitors Intention Loss Of Key Staff .

and its subsidiary Daihatsu Motor Co. they also faced significant threats. The goodwill enjoyed by TM. Though the company's cars like the Palio were initially quite successful. Even in the future. at least in the short to medium term. in spite of the intense competition.. Fiat customers were reported to have faced problems because of the non-availability of spare parts and lackadaisical customer service. Even though Fiat India had been present in India for close to a decade. Outlook India was one of the fastest growing automobile markets in the world. As of 2006. MUL was all set to challenge TM's diesel supremacy. and the company's reach were expected to improve Fiat's image in India. Toyota Motor Corp. Fiat's image suffered due to its dealers. . The alliance with TM was expected to improve its dealership network and customer service without the company having to make significant investments. had plans to launch a new small car for the Indian market. Even though both firms gained several advantages by co-operating.Advantages of the Alliance with Tata Motors Ltd. with passenger car sales forecast to reach two million units per annum by 2010. the TM-Fiat Auto joint venture was aiming to make an impact in this high-volume segment. the small car segment was expected to remain the largest segment of the market. small cars made up more than two-thirds of India's passenger car market. The TM-Fiat Auto alliance was expected to face intense competition from other automobile manufacturers in India. More significantly." said an auto analyst.in the growing car market. The alliance was to launch the Logan. Such problems had an adverse impact on the company's image. "Obviously Tata-Fiat [Auto] JV is entering an over-crowded and a price sensitive segment. and it struggled to compete effectively in the Indian automobile market. Ltd. by entering the diesel car market in a big way. it had the lowest market share among the 11 players . Therefore. Renault SA formed a 49:51 joint venture with Mahindra & Mahindra Ltd. which would compete against TM's Indigo. In February 2005. But this [small car] segment which contributes to more than 60% of the total car sales will remain a key segment in the Indian car market for many years.including later entrants like Skoda India . a sedan. some of who were in the midst of forming their own alliances.

IV.team-bhp. III.tatamotors.fiat.com www. II. V.com ICMR case book on Business Strategy Business Standard Newspaper Economic Times Newspaper www.References I. www. VI.com .

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