New Delhi, Sept. 6: The five-and-half-year old Tata-Fiat distribution alliance for cars has finally collapsed. Fiat India Automobiles Ltd — an equal joint venture between Italy’s Fiat SpA and Tata Motors — has decided to stop selling its cars through Tata Motors’ network of dealers. “Tata and Fiat cars will not be sold in the same showroom anymore. We have already started the process and we will cover 20 cities in the next one –and-a-half years,” Rajeev Kapoor, chief executive officer and president at Fiat India Automobiles, told reporters here today.
“We are opening two Fiat cafes — one each in Delhi and Pune — to promote the brand and stress on its Italian-ness,” added Kapoor. Under an agreement signed in December 2006, the two partners had agreed to establish a plant to produce 100,000 cars and 200,000 engines and transmission systems at a new facility at Ranjangaon near Pune. They had also agreed to expand their dealership network to 100 outlets. Relations between the two carmakers turned frosty earlier this year as the Italian carmaker felt that Tata dealers weren’t doing enough to push Fiat models. Sales of Fiat cars have been sluggish and hit a nadir in December last year when it slumped to 271 units. Last month, the Tata dealers were able to sell just 1,069 Fiat cars even as customers bought 16,829 Tata cars. At the 66th annual general meeting of Tata Motors in Mumbai on August 12, Ratan Tata told shareholders that Fiat had made certain assumptions about the Indian market that had gone badly awry. “Those assumptions in terms of volumes did not work out — more so for Fiat than for us — because there was a downturn. As we are 50 per cent owners, we had to share the losses of the company. Both Fiat and we are relooking at that whole contractual undertaking to see that we can make it more realistic. I hope we will be able to resolve that in course of time,” Tata said. The Tatas have invested Rs 1,199.54 crore in Fiat India Automobiles Ltd (FIAL) and more than half of the value of their investment has been wiped out by the Rs 1,214 crore accumulated losses at FIAL in its three years of operations. The losses in 2010-11 were pared to Rs 246 crore through an aggressive cost-cutting strategy. Tata had said the group was looking to rework the contractual relationship with Fiat SpA. A week later, Fiat boss Sergio Marchionne said at Rimini, Italy that the car maker intended to continue the partnership with the Tatas but would be seeking to change the terms of engagement. “The terms will change but the project will keep going ahead,” Marchionne had said. Fiat sells only three models in India: Palio Stile, hatchback Grande Punto and sedan Linea. Fiat is currently developing a new small car, which is expected to be launched by the end of next year. At less than Rs 4 lakh, this model will be pitted against marques from the Maruti Suzuki and Hyundai Motors’ stables. Bike boom Mahindra & Mahindra and Piaggio Vehicles want to re-enter the bike segment, encouraged by the steady growth in the two-wheeler market. While Mahindra & Mahindra plans to relaunch its Stallio motorcycle by November this year, three-wheeler manufacturer Piaggio Vehicles said it would re-enter the scooter segment with the Vespa model by March next year. Piaggio is also evaluating a possible foray into the motorcycle segment. “We are setting up a facility with a 1.5 lakh unit initial annual capacity to launch the Vespa,” Ravi Chopra, CMD, Piaggio Vehicles said. | 
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