Fiat India Automobiles Ltd., a joint venture between Italy’s Fiat Group and Tata Motors Ltd., has decided to make use of the underutilized capacity at its factory near Pune to supply engine parts to Fiat China.
Due to poor demand for Tata and Fiat models, the Ranjangaon factory is witnessing a reduced demand, which makes production of the engines for Fiat China quite feasible, starting March 2012. Mr. Rajeev Kapoor, Chief Executive at Fiat India, stated that the company was in the process of signing the agreements. Mr. Kapoor also added, by exporting engines to China, there will be better capacity utilization and Fiat China will be able to meet its requirement without making additional investments. According to a source familiar with the development, Fiat China requires 150,000 engines a year and the engine supply will be in accordance with the demand.
The Ranjangaon factory has the capacity to produce 250,000 engines a year but with poor demand for Fiat and Tata Motor cars, the factory has been forced to operate at one-third its capacity. Mr. Yezdi Nagporewalla, Executive Director at KPMG, stated that China importing from India will mark a new trend as there have not been many instances when India has exported goods to China.
Apart from supplying engines parts to China, Fiat India is also discussing the possibility of supplying engine parts to local auto makers. Currently, Fiat is in talks with passenger car makers to supply them diesel engines which are used in Fiat-Tata Motor cars. Fiat India has also bagged a contract from Premier Ltd. to supply a 1.3 liter multi-jet diesel engine. Premier Ltd. will use this engine in the belly of its SUV Rio.
