Fiat SpA’s Indian unit, which is attempting to claw back market share after record low sales, is entering the market with a new version of Palio, its only compact car, with a redesigned engine to avail excise benefits.
The company, which is resuming production after three months, will roll out the cars from Ranjangaon, near Pune, with a smaller 1.1-litre engine. The new car, in India’s largest-selling segment, is likely to be priced much lower than the Rs3.8 lakh for its existing model which is powered by a 1.27-litre engine.
Under Indian tax rules, a 16% excise is levied on a car which is less than 3.8 metres in length and has an engine capacity of less than 1.2 litres. This compares with 24% for all other passenger vehicles.
“We have started the trial run,” said Marius D’Lima, a spokesperson for Fiat India Pvt. Ltd. He declined to give the price of the new vehicles.
Fiat, which had a presence in India for almost a century through technical collaborations, was once famed for its Premier cars, the only locally-made rival to Hindustan Motors’ Ambassador for decades. In 1997, the Italian company entered into a joint venture with Premier Automobiles Ltd, whose stake it fully bought out recently. In the last decade, as many as 10 new car makers have set up shop in India, and are gearing up to introduce as many as 50 new models and variants this year, intensifying competition in the market that sells 1.3 million cars every year. As a result, Fiat’s market share has dwindled to less than 0.5%.
The firm, which makes the Palio, Adventure and Siena models, has seen sales crim-ped because of after-sales service problems and the image of Palio as a fuel-guzzler. It was also forced to shut down operations in its Kurla factory, which was damaged by floods in July 2005.
Fiat has sold around 2,000 vehicles thus far this fiscal. Analysts are sceptical about the new product’s chances in a segment dominated by Maruti Udyog Ltd, the country’s biggest carmaker, and Hyundai Motor India Ltd. “For a car buyer, the (after-sales) service provided by the company is very crucial, “ said S. Ramnath, vice-president at SSKI Securities. “Fiat has disappointed in this and is unlikely to make an impact” with the new vehicle.