Abstract

The relationship between Italian automotive major Fiat SpA and India’s Tata Motors to tap the Indian market started with a distribution and service alliance in 2005. This later went on to become a 50:50 industrial Joint Venture (named Fiat India Automobiles Limited) in 2007. Both the companies agreed to a joint distribution network, a back-end support system, and co-manufacturing of products including engine and technology sharing at Fiat’s facility at Ranjangaon in Maharashtra. While the industrial JV was yet to break even by 2012, the distribution arrangement too failed to live up to expectations and both Fiat and Tata Motors suffered losses. After witnessing a fall in the sales of Fiat branded cars and accumulating huge losses in the JV, Fiat announced that it would exit the joint-branded dealership agreement with Tata Motors. The company decided to go it alone after it sensed the step-motherly treatment faced by prospective Fiat car buyers at the Tata-Fiat showrooms. However, the break up of the JV was only at the dealership level. The companies decided to continue with the overall alliance. While the Italian company was making efforts to establish its brand in the Indian market, analysts were keen to know whether this move would help the company in improving its competitive position in this key emerging market. Fiat had had several false starts in India in the previous two decades. Would the new arrangement come in the way of its relationship with Tata Motors? Could Fiat afford to start all over again — these were the questions being asked.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Analyze the integration capabilities of Fiat in relation to its operations in India.
• Understand various issues and challenges in strategic alliances, particularly in cross-border joint ventures.
• Examine trends in the Indian automotive industry and the rationale for the alliance between Tata Motors and Fiat.
• Examine what went wrong with the alliance and how the problems could have been averted.
• Understand what actions the companies should take to salvage the industrial joint venture in light of the reverses in the alliance between them.

Keywords

Strategic alliance, Joint venture, International management, Strategic position, Strategic capabilities, Integration capabilities, Competition, Distribution strategy, Turnaround strategy, Indian passenger car market, Fiat, Tata Motors,