Long road ahead

It started as a marketing tie up and, last fortnight, graduated to a co-production joint venture. Tata Motors will now manufacture Italian car major Fiat’s premium range—comprising the Grande Punto and the Linea—at its Ranjangaon (near Pune) facility. Total capacity is expected to be 100,000 cars and 200,000 engines and transmissions with an investment of m650 million (Rs 3,630 crore). As a part of an earlier agreement, Tata is already assembling the Fiat Palio.

The relationship is not limited to India—both companies are jointly evaluating a bid for Ford’s Jaguar and Land Rover brands, which also lends credence to speculation that Tata Motors could be looking at utilising the JV to gain a foothold in the global arena.

“Yes, it is quite likely that the Tatas will use the Fiat network to gain an entry into international markets, but then the product quality also has to be there before they venture overseas,” points out Ramnath S., VP-Research, SSKI Securities. Ambarish Mishra, Senior Analyst, MF Global, a leading broker of exchange listed futures and options, doesn’t rule out the possibility of the duo forming a separate venture for an overseas foray.

The big question, however, is whether Tata will be tempted to contemplate an acquisition of Fiat, which has had its fair share of troubles. But with revenues of $65 billion, the Italian major is nine times as large as Tata Motors. “The possibility cannot be ruled out, as Ratan Tata is on the board of Fiat and one should not be surprised if this happens. However, Fiat is a big group vis-à-vis Tatas and maybe initially, Tata Motors might opt for a minority stake,” observes Ramnath.