Italian auto giant Fiat Auto S.p.A. is plotting to grab more market share in India. Now selling two models - the Uno compact and Siena sedan - Fiat will boost its lineup to five this year.
The company will introduce the Palio, the world car it successfully launched in Brazil, to attack the modestly priced Ford Icon, Opel Corsa and Maruti Este. Fiat will unveil a stripped-down version of the Siena. And it will offer the Palio Weekend station wagon. The models are part of Fiat's World Car 178 Project, aimed at growing markets.
Giovanni Battista Ravina discussed Fiat's expansion plans in a recent interview in Mumbai, India, with Staff Correspondent Sadananda Mukherjee. Ravina, 49, is managing director of Ind Auto and Fiat India Automobiles, a subsidiary of Fiat S.p.A. An edited, excerpted version of the interview follows.
You are producing two good cars - Uno in the small segment and Siena in the mid-segment. Why aren't sales picking up?
The problem is production constraint. With the Uno, very recently we had four to five months' backlog of orders because we could not produce more cars. Our maximum capability was 1,500 per month. So we told our dealers to stop booking. Uno is the strongest car in the segment, and there is good demand.
What are you going to do to improve the situation?
We have set up the new paint shop, a new assembly line for cars and a new assembly line for engines. A new welding shop is on its way to completion. There should not be any problem in the new year.
How much did you invest in modernizing the Kurla plant?
About $60 million.
What were your sales in 1999? How will you do in 2000?
We sold 16,000 Unos and close to 4,000 Sienas in 1999 - 20,000 in all. We can easily sell 20,000 Unos next year and 10,000 Sienas. However, this figure excludes the new products we plan to launch.
What are your plans for 2000?
We are ready to launch a basic version of Siena, as we found many consumers did not like fully loaded cars. This car will be more competitive. It will be without power steering.
The Hyundai Accent and Ford Ikon are very attractively priced. Opel Corsa also will be competitively priced. They are in the lower end of the mid-segment. So is Maruti Este. To compete with them, you must price the car accordingly. What are your plans?
The price will be competitive with the new entrants. It will be in the range of 500,000 rupees ($11,620). It could be one rupee more or one rupee less.
What other products are you planning to launch?
The Palio and a station wagon. We are working to make Palio more suited to Indian conditions. It is not likely to be launched in the first part of 2000. We will produce a car made in India, totally for India, with technology available in India. We cannot compete in the market if the car is not fully localized.
What kind of localization are you looking for with Palio?
Ninety-five percent. However, we will start with 70 percent and gradually move to our target.
Where will you position Palio?
It will be at the top end of the small cars. It will be a bigger car with a different size and different features. We have 1.0-liter and 1.2-liter engines for Palio. The engine size will depend on market conditions and economies of scale. It will be very competitive.
Your sales target for Palio in the first year? Your price range?
We think we can sell more than 30,000 in the first year. The price cannot be disclosed now, but it will be highly competitive. Our target price is much lower than 400,000 rupees ($9,300).
What about the station wagon? Will it be similar to the Palio Weekend sold in Brazil?
It will be in the premium segment. This car is also made in Europe, and there will not be many changes in the Indian version. We think the consumers think like Europeans in this segment.
What volume of sales are you expecting for the station wagon? And at what price?
We think we can sell more than 3,000 in a year. It will be priced slightly higher than the Siena.
What's your production capacity?
Theoretically 60,000, but in practice, 10 to 15 percent of capacity cannot be utilized. We can produce a little more than 50,000 vehicles.
What has been your investment so far? What would be your total investment in the car project?
About $220 million so far. We will spend a total of $350 million for the car project.
Have you started to export?
You know, export of cars is not so easy. Yet, we have made a modest beginning and exported some cars to Bangladesh and Malaysia. We have started exporting components - dashboards to Brazil and South Africa. We are producing 80,000 Unos in Europe, and we will export sheet metal for Uno doors to assembly plants all over the world. Our export target next year is $10 million.
When do you think you can make profits?
Not sooner than three years.
What are your priorities?
To improve after-sales service, help customers upgrade from Uno to Siena and train the workers. We are adding dealers and service points. We had 27 dealers last year. Our plan is to have 100 dealers and 300 service points by the end of 2000. We will also provide mobile service cars. Customer care is most important for us.
What are your long-term plans?
To make India a major production center. We want to make our presence felt. We want to stay here and to achieve a market share of at least 10 percent of the total market. The low end of the mid-segment will grow fast; prices are going down. We want to be a major player in that segment.
What is your prediction about market growth?
I don't agree with those who claim the market will double in three years. I think the market will grow 8 to 10 percent in the next three years.
What do you think about the tax structure?
The weight of the tax burden is high. The car is still treated as a luxury item and not an item of necessity. Rules differ from state to state. That makes matters complicated. There should be uniformity in this respect.
Then there are too many complexities. They must be reduced. Complexities cause delay and raise costs. New modern systems must be introduced. We need to have simple systems. There is scope for reduction in excise and customs duty. It is for the government to look into this.
Are you joining Ford in an engine project? Aren't you competitors?
Yes. It is complicated but helpful. I think every company today is willing to find local or partial solutions for its problems. When we talk about cars and how to reduce costs, we can join hands with others.