Losses are Accumulating and Troubles are Increasing with every passing day... But still Fiat has to give more than 100% to save its JV with Tata Motors. Because its failure may just end Fiat’s journey on The Indian Soil.
When Ratan Tata, Chairman, Tata Motors and Sergio Marchionne, CEO, Fiat S.p.A. came together on one dais on July 26, 2006 in Mumbai to announce the Tata-Fiat JV, the world took a back seat and listened carefully to understand the dynamics and the potential of the deal. As per the announced agreement, India’s largest home-grown automobile company planned to handle the sales & marketing functions for Fiat, while the Italian auto major agreed to support Tata Motors on the manufacturing front. At that point of time, the deal seemed a win-win for all – Fiat, Tata Motors and the consumer.
The JV was the need of the hour for both the parties. While a struggling Fiat needed a strong support at the ground level to make inroads to the Indian market, Tata Motors needed engineering know-how to infuse new life into its passenger car business as its ace model Indica needed a new power train to compete with the newer models from competitors, and also to comply with newer environmental rules (which, as per market estimates, would have attracted an investment of Rs.150 billion and at least three to four years for Tata Motors to come up with a new engine plant).
But as of where the JV stands today, the expectations have so far failed massively to turn into realities, more so for Fiat India. Talking in terms of hard numbers, total losses of the Tata Motors-Fiat JV increased by 39% in FY2009-10 to Rs.9.2 billion from Rs.6.98 billion in the previous fiscal. And going by analysts, figures for FY2010-11 will also indicate similar losses despite the Indian auto industry growing at a superb 25%. Going deep into details, Fiat India sales declined by 15% in FY’10 to 21,066 units against 24,727 units sold in FY’09. Even as per the most recent data, unit sales of Fiat India bottomed to 1,506 units in June this year as against 2,137 units sold in the same period last year.
The JV was the need of the hour for both the parties. While a struggling Fiat needed a strong support at the ground level to make inroads to the Indian market, Tata Motors needed engineering know-how to infuse new life into its passenger car business as its ace model Indica needed a new power train to compete with the newer models from competitors, and also to comply with newer environmental rules (which, as per market estimates, would have attracted an investment of Rs.150 billion and at least three to four years for Tata Motors to come up with a new engine plant).
But as of where the JV stands today, the expectations have so far failed massively to turn into realities, more so for Fiat India. Talking in terms of hard numbers, total losses of the Tata Motors-Fiat JV increased by 39% in FY2009-10 to Rs.9.2 billion from Rs.6.98 billion in the previous fiscal. And going by analysts, figures for FY2010-11 will also indicate similar losses despite the Indian auto industry growing at a superb 25%. Going deep into details, Fiat India sales declined by 15% in FY’10 to 21,066 units against 24,727 units sold in FY’09. Even as per the most recent data, unit sales of Fiat India bottomed to 1,506 units in June this year as against 2,137 units sold in the same period last year.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
