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Can Jeep Compass steer around Fiat’s fortunes in India?

Last month, Kevin Flynn got out of his office in Mumbai’s Bandra Kurla Complex, left behind the city’s sweltering heat and headed north, to embark on a long drive. The CEO of Fiat Chrysler Automobiles (FCA) India joined a group of 65 Jeep customers on a four-day adventure drive through Ladakh. “It was absolutely stunning. Amazing. The terrain, the mountain the colour, the smell and the feel … I was taken aback,” he says.Driving through the stark and treacherous terrain, the 59-year-old had an epiphany about a similarly challenging territory — the Indian automobile market. “Only very rarely in your life do you get a chance to dream something up from its embryonic state and make it happen,” he says, as his gaze scans the Mumbai skyline from the 16th floor office. He weighs his words before continuing. “I got a chance. This was one of my toughest challenges. It took me out of my comfort zone. And I made it happen. I have a tremendous sense of achievement.”The achievement Flynn is talking about is the impressive run of the Jeep Compass SUV in India. In its first year, it has sold 25,000 units, garnering a market share of 40% in its segment. India is also the company’s export hub to markets such as the UK and Japan.But to understand the feat, some historical context is necessary. Fiat, the storied Italian carmaker, has been in India since 1950. Every Indian who has lived through those decades till India’s liberalisation in 1991 will remember the Premier Padmini (or 1100) as one of three cars on Indian roads in that era of scarce means and choices. The Hindustan Ambassador and Maruti 800 were the other two. While the “Fiat car” might have once been ubiquitous, the company’s journey in India has been chequered, with multiple partners, joint ventures and aborted starts.Walchand Group’s Premier Automobile Ltd made those cars in India, through a manufacturing license from Fiat. In 1996, the two companies formed a joint venture. The boxy Uno model that used to be found on Indian roads in the late 1990s was a product of this short-lived venture.Fiat in India1950- Fiat signs manufacturing licence with Premier Auto Ltd to make Fiat 1100 64900249 1996- Fiat enters into a venture with PAL to make Fiat Uno; company later changes name to Fiat India Pvt Ltd1997- Fiat India Auto establishes a manufacturing facility to make Siena and Palio 64900265 64900297 2007- FIAPL enters into a manufacturing JV with Tata Motors; engineering firm Chrysler India Auto Pvt Ltd set up in Chennai2012- Fiat Group Auto India Pvt Ltd set up to focus on India sales2014- Fiat completed Chrysler buy; Fiat Chrysler Automobiles (FCA) formed2017- FCA begins production, distribution, imports and exports of Jeep brand in IndiaFourth Time LuckyIn 2007, Fiat joined hands with Tata Motors for a JV, and rolled out models such as Punto and Linea. That arrangement also met with limited success and ended in short course. In 2012, the company decided to go it alone, but success remained elusive.Subsequently, with Fiat’s acquisition of American auto major Chrysler completing in 2014, the reorganised global company was called Fiat Chrysler Automobiles. FCA India was also born in 2015.When Flynn took over as FCA India’s managing director in 2015, the automaker was on slippery ground. Its sales, profit, market share, quality, brand perception and reputation had all suffered. For a company with more than half a century of legacy in India, FCA had sold just 6,785 units in 2016. It was being mentioned alongside General Motors and other carmakers that were looking to exit India.Flynn was at the time “thoroughly enjoying” himself as the managing director of Jaguar Land Rover for South Africa and Sub-Sahara Africa — an attractive market for luxury cars. “My heart beats for South Africa. I miss it. My home base is still there.”Around the same time, FCA’s global boss, the Italian-Canadian executive Sergio Marchionne, prepared a blueprint to improve the company’s financials. The big bets were on the Jeep sports utility vehicles (SUVs) that came into the company’s portfolio through the Chrysler acquisition. India had a pivotal position in this NEW scheme.Depending on how you counted, this would be at least the fourth time Fiat was trying a new strategy in India. And luckily for the company, it’s working.Jeep Stable in IndiaCompass Price: Rs 15.34 lakh onwards 64900010 Jeep Wrangler Price Rs 58.74 lakh onwards 64900016 Jeep Grand Cherokee Price Rs 78.82 lakh onwards 64900029 It has won numerous awards and has helped FCA corner a segment market share (UV4 in rS 15-25 lakh category, according to industry classification) of 40%. “We had to leave our past behind and take on a new personality. Our strategy is working,” says Flynn. Forgetting the past is something FCA India will be happy about. India’s auto industry has come a long way from the time when Fiat began its journey in India.From two or three manufacturers, India now has about 20; sales have soared from 30,000 in the 1970s to over 3 million now. Amid this growth, Fiat stalled. In 2016-17, it sold 21,337 cars and its market share was under 0.7%. The mother company’s battle with high debt, loss-making operations and poor product pipeline didn’t help FCA India.In fact, despite its premium positioning, the Compass is the best-selling volume model from the FCA stable in India in more than a decade. “Thanks to great pricing and an impressive product, the Jeep brand has had an impressive start in India,” says Deepesh Rathore, director of automotive consultancy firm Emerging Markets Automotive Advisors. In 2017-18, the Compass won 26 industry awards, becoming one of the most successful brand launches in recent times.Finding True NorthHow did FCA manage this feat? "There are two ways we could have looked at rebuilding FCA in India," says Flynn. One was to start afresh, disconnecting from the past, rekindling the customers' passion and affection for FCA's brands. The other way was to address their deep-seated concerns, tackle the gaps between perception and reality and clear the past baggage to build a stronger future. "Indians have an elephantine memory. They can be prejudiced. We decided to go with the first one and start afresh in India," says Flynn. 64900137 64900145 64900153 The automaker invested $280 mn in 2015 to begin Jeep production in India through the manufacturing joint venture with Tata Motors. The plant in Pune makes the Compass, a model developed to serve markets like Brazil, Mexico and China. This dovetailed into what was happening globally and within the FCA stable.An SUV fever has gripped the world, and India is no exception. Almost every carmaker has been pivoting its product portfolio towards SUVs. FCA decided to give the world's original 4/4 SUV - the Jeep - a big push, even as it pushed fading brands such as Chrysler and Fiat into the slow lane. "Amid a global SUV fever, the fact that FCA has an exclusive SUV brand like Jeep is a great advantage," says Felipe Munoz, a UK-based analyst at Jato Dynamics, an automotive intelligence firm.To get both volumes and pricing right for the Compass in India, FCA made the subcontinent a global export hub for all right-hand drive markets such as Japan, the UK and Australia. "The biggest thrill," says Flynn, "is that Compass built here is the same car that gets sold in global markets like London and Tokyo."To reset customer expectations from the FCA stable, Flynn worked on a top-down strategy. He first brought in completely built units of its top-end Jeep Wrangler and Jeep Grand Cherokee to create a buzz. The company overhauled its branding, marketing, dealership and after-sale service by bringing in its proprietary Mopar aftersales service.The other challenge was that Indians were more familiar with the generic jeep than the brand. "We decided to take our name back," says Flynn. Exclusive dealerships and a new brand and marketing push energised this effort.But the icing on the cake was the pricing strategy, which Flynn calls his "onion philosophy", with the possibility to attract buyers from all kinds of segments. Compass and its variants are priced in the range of Rs 15.34 lakh to Rs 21.94 lakh (ex-showroom Delhi). At the lower end, the Compass can nudge potential buyers of, say, Hyundai Creta and XUV500 (Rs 9 lakh onwards) to spend a bit more and upgrade to a Jeep. It can also target the higher end, by luring potential customers of Toyota Fortuner and Ford Endeavour (in the Rs 25-lakh-plus segment) to buy the original 4/4 off-roader. "We didn't want to directly take on any competitor," says Flynn. "We saw this white space and decided to create our own niche through our pricing strategy. It is working."The Society of Indian Automobile Manufacturers, the industry body for India's carmakers, classifies the Compass in the UV4 segment, with a Rs 15-25 lakh price range, clubbed with pricier rivals such as Toyota Fortuner and Ford Endeavour.Riding on JeepA laggardFCA has struggled in India despite having a long presence. In 2016-17, it sold 21,337 units & had a market share of under 0.7%A new chapterJeep is helping FCA review its India push. With Compass, its segment share in the `15-25 lakh segment is 40%, with Toyota’s Fortuner at 45%Big betIt has invested $250 mn in the Pune plant for Compass and has made India a global export hub for all right-hand drive marketsCustomer reachUnlike the past, it is rolling out its own dealer network with 65 sales and service outlets; localisation is 65%Eyeing mass marketJeep is looking at the volume segment and planning to launch two more SUVs — a sub-4-metre one and a three-row SUVThe Road AheadA rejuvenated FCA India is now getting more ambitious. It has announced plans to launch two Jeep SUVs by 2020-21. The planned subfour-metre SUV will take on market leader Maruti Vitara Brezza as well as Ford EcoSport and Tata Nexon. It will be the smallest Jeep ever launched. The vehicle will also consolidate India's position as an export hub as there is enormous potential for this vehicle in global markets from Brazil to Europe. The second model is a three-row mid-size SUV that will sit above the Compass and may directly take on Toyota Fortuner and Ford Endeavour. However, FCA India must brace for some serious challenges. Taking on market leaders like Maruti Suzuki and Hyundai - who together control close to 70% of the market -will not be easy. FCA's poor dealership network will be a handicap; at 65 dealers against Maruti's 2,000-plus. Then there are issues such as after-sale service, availability of spare parts, etc. "Maruti and Hyundai dealers have delivered good customer experience despite high volumes," says Rathore. "FCA's challenge will be to ensure that its dealers deliver high customer satisfaction when volumes increase."Flynn is confident FCA India will expand its sales and after-sale network as more launches happen. "Fixing a car is easy. It is fixing the customer that is more difficult. What's going on in his mind? What emotions have been triggered? We will work hard to understand and address these," he adds.

Source: ET

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