As Maruti Suzuki India Ltd plans to buy diesel engines from Fiat, going into the details of it, one realises that Tata Motors has a key role to play as the home grown car maker giant owns half of the equity in Fiat India.
MSIL, India’s biggest car maker, stated that the pre-talks with Fiat, aimed at signing a diesel engine sourcing contract, have been in process. The agreement would allow MSIL to boost the availability of its diesel models in the market.
Fiat India Automobiles, the equal joint venture between Italy’s Fiat Group Automobile S.p.A and Tata Motors, owns a Rs. 4,500 crore engine and transmission plant at Ranjangaon in Pune. It has a 10-member board, with five nominees each representing Tata Motors and Fiat. Maruti Suzuki has decided to procure the 1.3-litre multi-jet diesel engines produced by Fiat.
MSIL’s move to strike a deal with an alien company can be attributed to the excessive demand for its diesel models such as Swift, DZire, SX4 and Ritz. Moreover, Fiat is reportedly producing a capacity, at the Ranjangaon plant, which befits the needs of MSIL.
Other than exporting, Tata Motors and Fiat make use of these engines in their own models. For instance, the engine is used in Fiat’s Linea and Grande Punto, and Tata’s Indica Vista and Indigo Manza.
As a matter of fact, Tata Motors’ ace car models such as the Indica and Indigo confront the models of MSIL directly. Diesel variants are responsible for more than half of Tata Motors’ sales. But for MSIL, these variants account for just 22 per cent to 23 per cent of total sales, owing to low supplies.
While Tata Motors did not comment regarding the deal, Maruti Suzuki confirms that the response it had received from Fiat executives was positive.
MSIL Chairman R.C. Bhargava said, “We are talking to Fiat for the diesel engines and the response we have got so far is very positive. As far as Tata Motors is concerned, it is for Fiat to talk to them. We are not in discussions with Tata Motors.”
A Tata Motors spokesperson said, “We would not like to comment because it is an internal business issue.”
After signing the international licensing pacts with Fiat and General Motors, the original creators of the 1.3-litre multi-jet diesel engine, Suzuki has the permit to manufacture these engines in India and elsewhere.
Suzuki has strengthened its relations with Fiat at the international level following its dissociation with Europe’s largest car maker, Volkswagen. However, on the other hand, Fiat does not have a distinct identity in India, rather it operates in joint venture with Tata Motors.
Speaking to reporters following the announcement of the company’s second-quarter financial results, Bhargava said that Maruti was nearing towards finalising the deal quite rapidly.
According to him, Suzuki Powertrain India Ltd (SPIL), which makes and sells diesel engines to Maruti, is operating its plant at full capacity. SPIL has a capacity of 25,000 units a month. On the other hand, the Fiat facility at Ranjangaon also has a capacity of 25,000 units per month.
Thus, MSIL is looking forward to tap the diesel car segment in the most effective way, so that the current discouraging situation becomes its past.
