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Fiat to venture into SUVs, sports cars segment in India
Fiat, one of the first Western carmakers to enter India but now the worst performing, opens a new, fully-owned 57-dealer network on April 1. Rather than launch a new model in the cheap, small car segment that dominates India and is ruled by Hyundai and Maruti Suzuki, Fiat plans to tap into fast-growing areas like sports utility vehicles (SUVs) and sporty cars. It will bring its Chrysler Jeep SUV to the country this year and build a small version of the car there by 2015, as well as take aim at the higher end of the market with Abarth, the sports version of its 500 and Punto models.
Analysts think it will be a challenge, but could work.
"I think Fiat's focus is on launching a couple of niche products and rebuilding the customer experience," said Deepesh Rathore, managing director of IHS Automotive India. "It's painful but it's the time to tell the customer that Fiat is different from the image he or she has had in mind."
Fiat agreed in 2007 to build and sell cars with Tata MotorsBSE -2.34 % as foreign automakers began piling into the fast growing market. But after three years of falling sales at dealers where Fiat's cars were displayed along the lower-priced Tata competitors, the Italian company decided in May 2012 to cut its distribution agreement with its Indian partner.
Areboot is certainly in order. While Fiat's 1.3-litre Multi Jet diesel engine is under the hood of 75% of India's small cars, the automaker sold just 203 Fiat-branded autos in February, the worst of any major brand, and its market share has dwindled to a mere 0.3% this fiscal year. "We all believe that we have scratched the bottom of the barrel," Enrico Atanasio, managing director of Fiat India told Reuters. "(Our performance) is not what the brand deserves."
Now is not a great time for a relaunch. Car sales in India are set to fall this financial year for the first time in a decade, hurt by high interest rates and slowing economic growth (Read : Fiat bringing Jeep brand to India in 2013).
Yet the potential is there. LMC Automotive expects India's car market, currently around 2.6 million vehicles, to grow to about 6.9 million in 2017. That's around half its forecast for western Europe, although well below its projections of 16.9 million for the US and 31.5 million for China.
"India is a small, low-margin market for Western auto makers... there is no indication of a near-term earnings upside," said Phillip Houchois, auto analyst at UBS. "But if you think India will one day be like China, it's nice to be able to put down roots there."
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