Fiat and Tata Motors, on Wednesday, announced that they are ending their distribution agreement under which Fiat has been using Tata Motors' distribution network in India to sell its Fiat cars.
Accordingly, the management control of Fiat's commercial and distribution activities will be handed over to a separate Fiat Group-owned company, a joint press statement said.
Under a 50:50 joint venture announced in 2006, Tata Motors has been managing the distribution responsibility of the Fiat branded products through joint Tata-Fiat dealerships.
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“As part of the growth plans and to provide greater focus on the Fiat brand, Tata Motors will hand over the distribution and service responsibility for Fiat cars in India to a Fiat Group-owned company being formed for this purpose,” the statement said.
The joint venture included a co-manufacturing of products at Ranjangaon near Pune, . The plant makes Fiat and Tata cars besides engines and transmissions for the domestic and export markets. However, manufacturing activities will continue as they are outside of the new distribution agreement and will supply cars and powertrains to Fiat and Tata.
Observers see the development as inevitable. Mahantesh Sabarad, Senior Analyst, Fortune Equity Brokers, said: “On re-entering India, Fiat needed an after-sales and distribution network which the joint venture provided and Tata Motors benefited from having access to a manufacturing plant. Now, with the need to spread out, the co-branded showrooms were a problem for Fiat as there are constraints of sales within a common showroom. A company would like to offer its own discounts, tie up with financiers and have promotional events.”
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