By Rajesh Mahapatra
NEW DELHI (AP) _ India's largest automobile manufacturer, Tata Motors Ltd., has agreed to sell Fiat cars as part of an alliance that is intended to allow the Indian and Italian automakers to share technologies and designs, the companies said Friday.
Starting in March, Tata Motors will manage the marketing and distribution of Fiat cars in India, a move that the Italian carmaker said will help reverse its sagging sales in one of the world's fastest growing automobile markets.
Sharing the dealer network is, however, the first step in what could be a significant alliance in the global automobile industry.
Sergio Marchionne, chief executive of Fiat SpA, said the alliance "will further expand in the areas of product development, manufacturing and sourcing.''
But both companies said it would be premature to talk about specifics of any cooperation in areas other than what has been agreed so far.
"It is an evolving relationship with no barriers, no boundaries,'' said Ratan Tata, chairman of the Tata Group _ India's top business conglomerate with interest in steel, automobiles, energy, software and hotels.
"But we don't want to overstate anything now,'' Tata told reporters.
Friday's announcement, made at an auto show in the Indian capital, is the first result of an agreement signed by the two companies in September last year, when they set up a join team to explore areas of cooperation.
Fiat produces the Palio hatchback and mid-sized Petra at a factory near Mumbai, but sales lag behind those of rivals such as General Motors Corp., Ford Motor Co. and South Korea's Hyundai Motor Co.
As part of the deal, select Tata Motors dealerships will sell Fiat and Tata cars and provide after-sales service and spare parts. Poor service and a lack of spare parts have hurt Fiat's sales in India.
The agreement with Tata Motors, a popular brand in India with one of the country's largest dealer networks, is "a recognition of the fact that we need to do more in this market,'' Marchionne said.
He said Fiat may use Tata Motors to source spare parts from India, which is increasingly becoming a manufacturing hub for automobile components because of low wages.
The deal is also expected to help Tata Motors to increase its share of the domestic passenger car market and help it become a global automobile company.
Car sales in India have grown 20 per cent annually in the past five years.
Tata Motors, set up in 1954, mostly made trucks and buses until 1998, when it entered the passenger car market with a hatchback _ the Indica, which now accounts for a fifth of total small car sales in the country.
However, the company needs newer models with updated technology and new designs to face competition from companies like Japan's Suzuki Motor Corp. and Hyundai.
"The alliance with Fiat could help Tata get technologies and designs for new models in future,'' said Kalpesh Parekh, an analyst with ASK Raymod James, a Mumbai-based brokerage. "It's a win-win deal for both.''
© 2006 The Canadian Press