Fiat spells out details of Tata Motors alliance

The last time Tata Motors announced an important initiative with Fiat was during the time of its financial results when a separate press release was handed out to journalists. In the process, the profitability numbers were forgotten and the media was naturally keener to get more details on the road ahead with Fiat. At that point, the two companies were going to kick off a 60-day feasibility study to explore the possibility of using Fiat’s plant in Cordoba, Argentina which was not being used optimally.

Tata officials also said that the Grande Punto and a new sedan (the Linea) would be manufactured in a joint venture at the Ranjangaon plant near Pune, the original location of Fiat’s India operations. In addition, 100,000 engines and transmissions would also be made here. Since then, Tata Motors has not spoken too much on the outcome of the feasibility study but Fiat literally set the cat among the pigeons at an analysts’ meet on November 8 and 9.

The company announced that in Argentina, one-tonne pickup vehicles would be sold in various Latin American and overseas markets under the Fiat and Tata brands. The commercial launch of this range was scheduled for the second half of 2008. As is well known by now, Tata Motors is gearing up to launch the world pickup called the Sprint in Thailand through a joint venture with a local partner. Speculation is rife that this vehicle will soon make its foray into Korea and other parts of Asia too. Needless to add, India will also be an important part of the overall plan.

It is, therefore, not clear if the Sprint will find its way into the South American market from Fiat’s Argentina facility. There is no reason why it should not given that this part of the world is a happy hunting ground for pickups except that there will be formidable competition from other established players.

It is equally probable that Tata Motors and Fiat could collaborate on a new pickup that will be sold overseas. Given that it will be sold under both brands (as announced in the analyst meeting), the Italian automaker would ensure that it has a more pro-active role in the manufacturing process and oversee critical quality issues. It has also indicated at the analysts’ meeting that 25,000 pickups have been targeted for sales in the first year.

##### SOUTH AMERICA PLANS

On the subject of South America, the other big announcement relates to Tata and Iveco LatAm setting up a joint venture to distribute Iveco-Tata branded vehicles in Brazil “through an expanded Ivco dealer network”. Readers will recall that Iveco had only recently parted ways with its long-time ally, Ashok Leyland leading to speculation that it would eventually team up with Tata Motors. The fact that Fiat has confirmed this development and that it will take off in Brazil only shows that Tata has identified South America as an important area of business.

The company has, time and again, reiterated that global business is critical to its growth especially when it concerns a cyclical business like commercial vehicles. It has been quite vocal about its long-term intentions in markets like South Africa and Turkey. Now, with Fiat detailing some aspects of the South America blueprint, it is clear that this continent will play an important role for Tata Motors in the coming future. Incidentally, the other link with Brazil is the alliance with Marco Polo which will see buses being manufactured in a greenfield facility in India.

Getting back to India, Fiat has said in the analysts’ meeting that the combined output at Ranjangon of the Grande Punto, Linea and Tata Models will be 1.3 lakh units in the initial phase of commissioning the plant next year. What is even more interesting is the fact that combined dealer points will be up nearly fivefold to 200 outlets from the present number of 45. On the face of it, this seems a tall order unless Tata Motors converts a large part of its existing retail fraternity to becoming joint dealers or Fiat too. Not everyone would be too enthusiastic but then, this time around, it will involve selling non-competitive models which could give the consumer a greater choice.

Clearly, there is no indication on the future of the Palio. Fiat India officials had told Autocar Professional that the car would not be phased out in India. It is certainly not going to be part of the joint venture and one wonders, therefore, if Fiat has another plan for this car or will abandon the idea of being a player in the volumes-driven compact segment. It would be a pity if it were to call it quits; after all, it was the first company to pose a challenge to the Maruti monopoly with the Uno a decade ago.

The company’s other bridge to India is through Suzuki for whom it will produce (under a licence agreement) the 1.3 Multijet diesel engine in early 2007. Initial volumes will be over one lakh units and indications are that this could touch three lakh units with half the output being exported to Europe and other parts of Asia.

Fiat also said at the analysts’ meeting that the 1.9 Multijet engines were also part of the Suzuki pact and supplies would begin before start of production at the company’s plants. Production in Asia is expected in Asia in 2010 with volumes tipped to be one lakh units. By this time, India would be the largest manufacturing base for Suzuki worldwide and Maruti’s own annual output will have touched one million cars. Diesel will account for a significant part of this number.

The analysts’ meet also highlighted plans for other regions but China could be some food for thought. Targeted volumes for 2010 are three lakh units and the product portfolio will include the Doblo, Grande Punto and Linea between 2007 and 2009 after which new models will follow to boost volumes. Fiat has also indicated that there will be significant investments in dealer development in China. India will, at best, be an important sourcing hub for engines and other components.