Is Jeep the right fit for Fiat India?



Fiat has had such a tumultous history in India that Jeffrey Archer could very well earn some millions more, should he decide to pen it as a corporate potboiler.

Fiat fans call yesterday's annoucement as Fiat's third re-entry into the Indian market, though I'd beg to differ with them on it. The first took place when the Uno arrived with PAL. What followed was a company lockout, legal cases and what not that still hound the courts. The next was the re-entry with the Siena in 1999 and Palio in 2001. When they squandered that opportunity, they attempted a third one with a distribution tie-up with Tata Motors, a re-launch of the Palio and the follow-up with the Punto and Linea. So technically this is the fourth attempt by Fiat, although they are not in as bad a situation as they have been during previous attempts.

Look at it; Fiat-Chrysler have been around as a group for over three years now. The group has sizeable debts, but is also flush with cash; € 20 billion or thereabouts. In India, the group has investments of 2.2 billion euros to date and last year (June 1 2011-May 31 2012) it recorded a little under 1.1 billion euros in revenues. That is rather phenomenal, though it's probably on the back of the success of the 1.3 Multijet diesel that finds home in a sizeable number of Indian cars. The rest of its business looks rather gloomy. Linea and Punto sales are down and doesn't seem to be anything more than a bit player in their respective segments. Tata Motors continues to manufacture the Vista and Manza at the Ranjangaon plant, but on the whole, the plant is heavily underutilized. With Fiat going on its own as far as distribution goes, the company is going through a painful transition and is very hopeful of a bright future going ahead. They are even talking a 5 per cent marketshare in the next few years! Bullish they sure are.

It's counting on a whole bunch of launches in the next four to five years. These include new-gen Puntos, Lineas, a small UV and even a cheaper Linea. And then, there's Jeep that will debut next year with the Wrangler and Grand Cherokee, followed by new products that will be assembled at Ranjangaon a few years later. What struck me as odd during the press conference yesterday was the in-depth mention of plans that would ideally have made rivals cringe. Think about it; we've told you in our stories when the facelifts are due even for their next generation models and that, technically is competitive knowledge. Yet, the other way of viewing it is the serious lack of belief in Fiat India that its channel partners have as well. What else would lead anyone to setup a dealership without knowledge of product launches for the next few years? And it's important to instill confidence given the historical baggage that Fiat comes with. Investments in dealerships, front-end and backend are huge these days, what with high wage, land and lease costs as well as insistence by companies to follow set formats and purchase of tools and equipment for dealerships and workshops. And these aren't cheap; some luxury brands for insistence have a single supplier for all their dealerships globally and a dealership proprietor has no choice but to go with them, even if it means paying a fair share of money over duties, taxes and what not.

Sure, Jeep has a plan in place that involves setting up dealerships and an aggressive localisation plan, but the brand, while a known quantity in India, is best associated with its historical products and not its newer ones. That may prove to be a serious challenge, especially given that products like the Grand Cherokee will spar with products from BMW, Audi, Land Rover and Mercedes-Benz, brands that enjoy better equity in India at the moment. And they will have just two CBU products for the best part of two years in which to keep the dealerships running and the enthusiasm in the products alive before their Indian assembled products roll out. The challenges are aplenty and the journey won't be easy for both brands.

Here's hoping then that both brands get their act together and pull it off for the group. For we don't want to be talking about their fifth re-entry in a few years from now.