Tata Motors and Fiat Auto: Joining Forces

Even though Fiat India had been present in India for close to a decade, it had the lowest market share among the 11 players - including later entrants like Skoda India - in the growing car market. Though the company's cars like the Palio were initially quite successful, Fiat's image suffered due to its dealers. Fiat customers were reported to have faced problems because of the non-availability of spare parts and lackadaisical customer service. Such problems had an adverse impact on the company's image, and it struggled to compete effectively in the Indian automobile market. The alliance with TM was expected to improve its dealership network and customer service without the company having to make significant investments. The goodwill enjoyed by TM, and the company's reach were expected to improve Fiat's image in India...

India was one of the fastest growing automobile markets in the world, with passenger car sales forecast to reach two million units per annum by 2010. As of 2006, small cars made up more than two-thirds of India's passenger car market. Even in the future, at least in the short to medium term, the small car segment was expected to remain the largest segment of the market. Therefore, in spite of the intense competition, the TM-Fiat Auto joint venture was aiming to make an impact in this high-volume segment. "Obviously Tata-Fiat [Auto] JV is entering an over-crowded and a price sensitive segment. But this [small car] segment which contributes to more than 60% of the total car sales will remain a key segment in the Indian car market for many years," said an auto analyst...