Is there a way out for Fiat?

Since August 2012, Fiat has sold less cars every month than BMW and Audi, the two largest luxury car manufacturers in India. That is a telling statistic about a company that is the ninth largest in the world in terms of the number of cars it makes and sells, one of the oldest in the business in India and is part of one of the largest global automobile companies.

This despite the fact that it continues to make some of the most good looking and exciting cars ever built. Be it the Premier President in 70s or the Padmini based on it, in the 80s, Siena in 90s, Palio in the first half of last decade or Linea now, a Fiat stands out as a clutter breaking design. It also has cutting edge technology as the award winning 1.3 litre mutijet diesel engine that powers at least half a dozen cars in India, exemplifies (notwithstanding, that another company has done a better job with that engine than Fiat itself). And it has legions of fans who keep waiting for more gems from its armoury even though not one has emerged in well over two decades. The number of people who bump into me and reminisce about their 1984 Padmini or commiserate about the dire health of the company, is testimony to that.

And dire it is, and it is not an over estimation of where Fiat finds itself today in India. The only thing that Fiat has successfully managed over the last few years is make things significantly tougher for itself…consistently. And the Indian winter is something that the Italian company cannot handle. When all the others in the industry look forward to better times (the second half of a financial year is always better than the first), Fiat develops cold feet…literally.

Last year, around the same time, when the festive season kicked in, Fiat decided to go on a vacation. Its already stuttering sales wobbled a little bit more managing three digit figures in September and October, nudging ever so slightly in November and slumping again in December. Cut to 2012, its deja vu. Since June, it has not sold more than 1000 cars in any month. Much newer players like Renault, Nissan and Volkswagen are doing way better. And there is not a sign of improvement anytime soon.

The problems are multifarious. The two main cars that Fiat has in India–Punto and Linea–are contemporary, fun to drive and built to last. But the after sales and service aspect is something that the company has struggled throughout. Right from the days when it partnered with the Doshis to the times when it had a joint venture with Tata Motors.

The partnership with Tatas in 2007 was expected to lay the platform for Fiat to script a revival story with the launch of Punto and Linea in 2009. Instead it became a bigger problem. The dealer, knowing fully well where the money was coming from, was unabashedly partisan and customers looking to buy the decidedly better cars in the common showrooms were welcomed by indifferent salesmen. Call it Tata’s cheekiness or Fiat’s bad luck.

All this while, the Turin based firm did not help matters by being complacent and callous. The fact that the JV lasted 5 years and was called off only earlier this year, itself is a revelation. In any other company, stagnant sales for two years would have meant a complete overhaul, heads would have rolled, dealers fired and partners threatened. Not in Fiat.

Many believed that the Punto and Linea, two cars responsible for a revival of Fiat in Europe, were its last bet in India. That chance has gone abegging. Now, trying to lift itself from the ashes of a failed relationship, Fiat finds itself increasingly vulnerable in the marketplace. It lies at the bottom of the pile of mass market car makers in India and is also one of the few in perennial decline. Newer players have come in with fresh ideas and exciting products. India is now a fiercely competitive terrain where even slight errors are brutally punished. Ask GM and they will testify. It has also become a market which does not offer second chances.

Its product pipeline also does not look very robust. Barring the Bravo, a next generation version of the Stilo, and the new Uno, there is nothing that can really penetrate an increasingly clogged passenger car market. The Bravo though would be an expensive hatchback and the Uno, thanks to its forgettable legacy, is not a brand that excites many in India. But there are some steps albeit belated and still a bit lethargic, that inspire some hope. Opening up its own independent showrooms and appointing an industry veteran and seemingly earnest person as the head of India operations are some of them. It is still going to be a slow climb and one that will test every managerial faculty. But there is hope.

The silver lining is, Fiat India is in such dire straits that it can only get better from here onwards. With its low resources and damaged reputation, if it does manage to get going, it will be nothing short of a miracle. From a 100 year old automotive company, we should not discount the possibility of that.

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