Fiat's Indian Journey|Business Strategy|Case Study|Case Studies

Fiat's Indian Journey

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Case Details:

Case Code : BSTR020
Case Length : 7 Pages
Period : 1996 - 2002
Organization : Fiat India Limited, Premier Automobiles
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Auto and Ancillaries

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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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"We will show what Fiat means, in terms of technology, service, deliver, cost, finance, mobility solution to the customer."

- Maurizio Paolo Bianchi, Managing Director (Fiat India), in October 2001.

The Launch of Palio

In September 2001, Fiat India Automobiles Limited (Fiat) held a lavish function in the Indian coastal state of Goa. The function, featuring performances by leading Indian musicians Louis Banks and Sivamani, who had composed music especially for this event, was held to celebrate the launch of Fiat's much-awaited car, the Palio. Designed by well-known Italian automobile designer Giorgetto Giugiaro,1 the Palio was already a huge success in countries like Brazil and Argentina.

The media termed the high-profile launch of Palio, backed by a Rs 120 million endorsement deal with leading Indian cricket player Sachin Tendulkar (Tendulkar), as a desperate attempt by the Italian automobile giant to establish itself as a serious contender in the Indian car market. The Palio was expected to boost the company's sales, which had been declining for the past few years. Known as the Fiat Group's 'world car', the Palio was being seen as Fiat's last chance to tackle its accumulated losses of Rs 10 billion.2 Fiat did appear to be taking a 'last chance' with this new car. It had dedicated more than 83% of its total installed capacity for the production of the Palio. The company had invested an additional $ 250 million at its Kurla, Maharashtra, plant for the new car.

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Unlike some of the other small cars that had been adapted to suit tough driving conditions in India, the Palio had been designed from scratch with these conditions in mind. Fiat had even decided to reduce the combined production of its other models - Uno, Siena and Siena Weekend - to 10,000 per year. Instead, the company planned to build 50,000 Palios during the first year of its launch.

It was reported that the company was ready to stop producing the Uno completely, if necessary. Company sources revealed, "The decision regarding whether the Uno should be continued will be taken after the Palio is launched and after observing the performance of the former car." Fiat had also postponed the launch of the Multipla (part van, part car) for the time being. Fiat India's Managing Director Maurizio Bianchi was extremely optimistic regarding Palio's prospects, "With the Palio we plan to give the widest range possible in the B-segment.3 We will launch with the 1.2 and 1.6-liter petrol (versions) and by 2003 offer a 1.9 diesel (version). We will also try to give a wide range of options to suit every pocket and taste. In this way we will be able to span the complete spectrum of the B-segment which today accounts for 40% of the Indian market."

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1] Voted as 'Car Designer of the Century' by the motoring press worldwide.

2] Business World, October 8, 2001 estimates - Fiat India refused to disclose the exact figures.

3] Cars priced between Rs 2, 00,000-5, 00,000.


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