India's Tata Motors (IW 1000/185) and Italian automaker Fiat (IW 1000/81) on May 2 announced the end of their distribution pact, meaning that the Indian firm will stop selling and servicing Fiat cars in the country.
Distribution of Fiat cars will be handed over to a separate Fiat group-owned firm, the firms said in a joint statement, as the Italian auto giant seeks to boost sluggish car sales in India.
This was being done as "part of the growth plans and in order to provide greater focus on the Fiat brand," the companies said, which ends months of speculation over the fate of the pact that was set up in 2006.
Fiat sold 16,073 cars in India during the fiscal year which ended March 31, a 24% drop in sales year-on-year.
Fiat will now also set up its own car dealer network in India, the firms said.
The two firms will however continue with their 50:50 joint venture -- Fiat India Automobiles -- to manufacture Fiat and Tata cars, their engines and transmissions at a factory at Rajangaon in western India, the statement said.
Fiat -- whose brands include Fiat, Alfa Romeo and Maserati -- currently manufactures cars such as the Punto hatchback and Linea sedan in India through its joint venture with Tata Motors.
"Ending the distribution pact was widely anticipated. Fiat had never got a desired foothold in the Indian market," said Mahantesh Sabarad, auto analyst with Mumbai's Fortune Equity Brokers.
"In the future, Fiat will need to get its pricing and products mix right."
Copyright Agence France Presse, 2012