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Corporate Sep 20, 2012

Sales JV: Fiat’s long and painful breakup with Tata Motors

By Firstbiz Editors

The breaking up of the sales tie-up between Tata Motors and Fiat is proving to be long and painful.

After ending the distribution joint venture in May, the Italian auto major, which is finding it difficult to stand on its own here, is yet to come to terms with the separation as the company's sales decline fast.

According to a PTI report, Fait expects the separation of sales to be complete by March. It plans to have 80 dealers of its own and is in the process of hiring about 100 people for customer facing roles, the report said.

A story in The Times of India says Fiat has dumped many of the Tata Motors dealers as the Italian car major seeks to establish its own sales and distribution outlets across the country.

The ending of distribution tie-up was aimed at boosting the sagging sales of Fiat. AFP

Fiat had in May ended its distribution, sales and after-sales joint venture with Tata Motors, even as the manufacturing tie-up is still on.

Under the agreement between the two companies, entered into in December 2006, joint venture Fiat India Automobiles was to handle sales and also make Fiat and Tata Motors cars at the Pune plant, earlier controlled only by Fiat.

The ending of distribution tie-up was aimed at boosting the sagging sales of Fiat.

The move had come as a relief to Fiat car owners in India, who have been complaining of getting a step fatherly treatment at Tata Motors service outlets.

The disquiet between the auto makers had grown with the sales of Fiat falling sharply.

In 2011-12, Fiat's sales in India declined 24 percent to 16,073 cars, compared with a 5 percent increase in overall passenger vehicle sales to 26.2 lakh units.

During April-August this year, Fiat's sales nosedived 48%, the ToI report says quoting numbers from the Society of Indian Automobile Manufacturers (Siam).

While ending the distribution tie-up with Tata Motors, Fiat had said it would set up a new arm here to look after sales, distribution and service of its cars. The subsidiary will be controlled by parent Fiat Group.

It had also said that Tata Motors dealers, who were also selling Fiat cars, would be encouraged to be Fiat dealers as well, but after setting up separate stores.

But the ToI report suggests Fiat is not that keen on engaging Tata Motors dealers. This should also come as a good news for Fiat car owners, who have been wanting the company to set up own distribution chain with own trained personnel.

However, the ToI report has no confirmation on the development.

"All I can say is that there is no obligation for us to retain the existing Tata Motors dealers (selling Fiat cars) even though we will continue to have a preference for them," the report quotes Ravi G Bhatia, VP (Commercial) for Fiat India Automobiles Ltd.

For the pioneer in diesel engines to change its fortunes in India, the company would have to end its dependence on Tata Motors completely as soon as possible.

by Firstbiz Editors

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