Update: Tata Motors-Fiat tie-up may expand into new areas

06 March 2006

Tata Motors and Fiat are exploring the possibility of cooperation in other areas following the launch of joint retailing of passenger cars. The two companies had signed an agreement last year and had appointed a joint team to identify potential areas.

The two auto majors may look at sharing technologies, joint production of select models and joint sourcing of components. They may also consider extending the joint retailing model to some overseas markets as well.

Fiat has been struggling in the Indian market ever since its entry in the '90s with the hatchback Uno, followed by the sedan model Sienna. The only model to achieve some market acceptance was the hatchback Palio, which suffered later on because of poor fuel efficiency.

Fiat India has an assembly line in Kurla, Mumbai, which was acquired from its original JV partner Premier Auto. The company had also built a new plant in Ranjangaon, Maharashtra, which is lying idle.

It is speculated that Fiat is looking at handing over the Ranjangaon plant to Tata Motors, which needs to augment its capacity. Fiat may also hand over the assembly of its cars in India to Tata Motors. Given the low volumes of Fiat cars, it makes sense for the Italian company to outsource its assembly.