Tata Motors and Fiat Auto: Joining Forces

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Case Details:

Case Code : BSTR248
Case Length : 24 Pages
Period : 2006
Pub Date : 2007
Teaching Note : Available
Organization : Tata Motors and Fiat Auto
Industry : Auto and Ancillaries
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

Advantages of the Alliance

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...

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Even though both firms gained several advantages by co-operating, they also faced significant threats. The TM-Fiat Auto alliance was expected to face intense competition from other automobile manufacturers in India, some of who were in the midst of forming their own alliances. In February 2005, Renault SA formed a 49:51 joint venture with Mahindra & Mahindra Ltd. The alliance was to launch the Logan, a sedan, which would compete against TM's Indigo. Toyota Motor Corp. and its subsidiary Daihatsu Motor Co. Ltd., had plans to launch a new small car for the Indian market. More significantly, MUL was all set to challenge TM's diesel supremacy, by entering the diesel car market in a big way...


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...


Exhibit I: A. Market Shares in the Indian Medium and Heavy Commercial Vehicles (Goods + Passenger) Segment - Q1 2005-06 (Units Sold)
Exhibit I: A. Market Shares in the Indian Medium and Heavy Commercial Vehicles (Goods + Passenger) Segment - Q1 2006-07 (Units Sold)
Exhibit II: Market Shares in the Passenger Car Market - Q1 2005-06 & 2006-07
Exhibit III: Corporate Structure of the Fiat Group
Exhibit IV: The Grande Punto
Exhibit V: Fiat Group Financials 2004-05
Exhibit VI: New Models of Fiat Auto
Exhibit VII: Tata Motors: Financials
Exhibit VIII: Tata Motors: Sales
Exhibit IX: Fiat Group: Automobile Models

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