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Fiat, Tata dealerships to go separate ways

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In a desperate bid to boost sagging sales, Fiat India today announced it would reorganise its distribution tie-up with Tata Motors by setting up independent showrooms in 20 cities by the end of 2012.

Fiat India, which had entered into a joint-venture agreement with Tata Motors in 2007, sells cars through some of the Tata Motors dealers.

The companies also co-manufacture products at a joint-venture facility in Ranjangaon near Pune. While the Tatas manufacture the Manza there, Fiat produces all its models.

Under the new agreement thrashed out with the Tatas, Rajeev Kapoor, president and chief executive officer, Fiat India, said the same dealers engaged by the Tata-Fiat joint venture would open separate showrooms for Tata and Fiat cars. The Tata-Fiat JV sells cars through 170 dealer outlets across the country at present.

“The joint-venture agreement with Tata Motors stands. We are altering our marketing strategy. We have identified 20 cities where Fiat cars will now be sold separately and independently,” said Kapoor. It is not clear whether the strategy would be extended to other cities where the two brands sell at the same showrooms.

The move means dealers would have to make additional investments to set up a separate showroom, which would also include a separate after-sales service facility. The need to change the alliance was dictated by the fact that the dealers in joint showrooms were selling more Tata cars than Fiat. Fiat India sales fell to 21,112 units last fiscal, a drop of nearly 15 per cent over the previous year.

The fall was registered at a time the Indian passenger vehicle industry grew more than 29 per cent to sell 2.52 million units in 2010-11.

In contrast, Tata Motors sold 352,180 vehicles last fiscal, a growth of 23 per cent.

A senior executive at one of the dealerships said, "The problem has been they have a lot of competing cars. The Manza was in the same category as the Linea while the Punto was a challenger to the Vista. As the Tata cars were cheaper, dealers tended to push them. They also had better value in the second-hand car market."

Tata Group chairman Ratan Tata had earlier this year indicated the JV had not been as active as planned and the association needed to be critically examined to optimise its potential.

In August this year, Fiat chief executive Sergio Marchionne had told journalists in Italy while the JV would stay, "the terms would change to improve its fortunes".