Fiat's growth engine starts knocking

Trouble seems to be brewing yet again at Fiat India. Even after replacing its country head and launching a new Palio in August, the Italian major's sales are falling in India.

The B-segment Palio, with its more fuel efficient version, sold 2,089 units since its launch in August, a 41 per cent fall when compared with its sales in the corresponding previous period. This at a time when other carmakers are seeing a sharp spurt in sales.

Under-utilisation of the Kurla car plant, poor after-sales service and high inventory of the older Palio with dealers are the reasons for the company's poor show, according to dealers.

Ananda Mohan Gupta, director-commercial at Fiat, said production was demand-driven and was more or less in line with sales.

"There is some pipeline stock of old Palio still left with dealers, and we are not holding back the supply of Palio NV."

"We are soft peddling our products now, the Palio NV has brought the customers back into our showroom and we have received a very good response so far," reasoned Gupta.

Fiat's other offering the Uno, the Siena and the Adventure have sold around 750 units in the same September-November period, a marginal improvement over their sales in the previous year, mainly fuelled by Uno's price slash. But this is still minuscule compared with rivals' products.

Fiat dealers, however, told Business Standard that the company has been rolling out fewer cars every month.

Fiat India was showing signs of recovery around May-June 2003 under its new chairman and managing director Alberto Montanari, just before the Italian parent's troubles began.

In an attempt to resolve the problem and quash rumours of an impending exit from India, Fiat announced some changes in its after sales service contract and slashed the prices of its spares in August.

"Fiat is the most improved company in recently published JD Power ratings. We are still below the industry average but will try and get there by the end of this fiscal," Gupta said.