Fiat Enlists Chrysler in Bid for India Breakthrough

MUMBAI – Fiat Group Automobiles India is making a new start in the country in a strategic alliance called Fiat Chrysler India Operations.

Led by a new president and managing director, Nagesh Basavanhalli, the alliance is aiming for a 4% market share in three years from the less than 1% now held by Fiat. It will launch nine new and refreshed models, four each from the Fiat and Chrysler-Jeep family and an Abarth-brand small sports car.

The Italian and U.S. partners bring to the alliance their reputation and achievements in modern manufacturing technologies, innovative production processes and small but efficient engines. After ending its joint distribution deal with Tata earlier this year, Fiat brings a dealer and service network of 70 outlets slated to increase to 120 by year’s end.

“We are here to stay and have started with a 3-pillar strategy based on product, brand and network,” Basavanhalli says. He is aware of the current slowdown in the Indian economy, high interest rates and still-higher taxes. But, he adds, “We are playing in the right segment, we have the right strategy in place and we will be connecting with the right customers.”

The first new product will be the Jeep Cherokee, which Indian consumers have known and cherished since World War II. It is expected to launch by 2014, with the expectation of meeting the fast-rising demand for compact SUVs in the Indian market.

Fiat has taken the first step toward starting a marketing campaign with the formation of a new national sales company, an independent entity within the alliance to handle sales and service.

The auto maker offers an attractive service package with a comprehensive 3-year manufacturer’s warranty that can be extended to five years. There also is 24/7 roadside assistance, mobile van service and a call center for quick emergency response.

Fiat plans to make India the export hub for its Chrysler Group unit, of which it has a 58% stake with plans to acquire full ownership. The Italian auto maker hopes to ultimately increase market share in the Asia-Pacific region for the Jeep, Chrysler and Dodge brands in addition to its own models.

It remains to be seen whether these plans can improve Fiat’s fortunes in India, where it has operated for 63 years. A licensing agreement with Indian auto maker Premiere in 1950, creation of its own subsidiary in 1997, a distribution alliance with Tata in 2006 and the opening of two plants have not resulted in much success.

Fiat offers only two car models in India, the Grande Punto and Linea. Despite offering a choice of three engines and three trim levels, sales have been lukewarm, slipping from 22,757 units in 2009 to 8,040 during the first six months of 2013.

The auto maker has fared much better as an engine manufacturer, producing 4.5 million small but efficient powerplants at its 300,000-unit-capacity factory at Rajnandgaon, near Pune. In addition to application in Fiat’s own cars, these engines are sold to Maruti Suzuki, Tata, General Motors India and Premiere. They include 1.3L multijet diesels as well as 1.2L and 1.4L gasoline mills.

Reasons for Fiat’s struggles in India include mismatched partners, the absence of a compact car, spacious SUV or affordable sports car in its product portfolio, and the inability to communicate its strengths to potential buyers.

Even the alliance’s current India plans seem flawed. It has too many company faces: Fiat India Automobiles, Fiat Group Automobiles India, Fiat Chrysler India Operations and the national sales company.

It will be a tough task for the alliance to change Indian consumers’ perception of Fiat as anything other than an engine manufacturer.