It’s not been an easy drive for Fiat Chrysler on the Indian motorway. And Kevin Flynn, President and MD of Fiat Chrysler India, knows he’s got a game to change. In a conversation with The Dollar Business, he talks about the company’s plans with its SUV brand Jeep, its JV with Tata Motors and how he is ironing out creases in its sales & distribution strategy book.

Interview by Vanita Peter D’souza | October 2015 Issue | The Dollar Business

TDB: What is Fiat’s strategy to compete in a very crowded car market dominated by German, American, South Korean and Japanese automakers? Is your strategy any different in India as compared to that across other markets?

Kevin Flynn (KF): I have been here for six months now and it’s scary that time is flying. In the first three months of my tenure at the company, I took my time to understand our challenges and got busy fixing issues. We need to look back at the decisions made in the past in India. Wherever we are at present is clearly not the position we wanted to be in. We have to understand the gaps and bring clarity on where we want to be. We haven’t been good custodians of the investment made in the company as the level of investments made have not yielded good returns. So, we are refining, reforming and creating our new strategy, while moving forward from where we were.

TDB: And you’ve begun with working on the happiness quotient of dealers, isn’t it?

KF: It has been observed that our business relationships with dealers hasn’t been realised completely. The schemes introduced to our dealers didn’t work well for them. That compromised our sales and growth. So the first thing we did is that we reworked on arrangements between the dealers and us. If they get the right earnings, they will be encouraged to reinvest. So we need to refuel the appetite by demonstrating the direction we are taking, through our actions and commercial exercise.

Plus, I want to change the physical and potential earning of the dealer. I think we have put together a good plan. The dealer package is improving and we must now instill confidence in the way that we move forward. We have also spent a lot of time with the dealers, creating consulting panels. In the last six months, we have had two national dealer meetings. In terms of the after-sales and technical backup, we have improved our game ten-folds. Historic perception in the market is that you can’t get parts. Well! We got a warehouse with 96% fill rate. There is a perception that people are unhappy with our service. But if looked at our net promoters’ score methodology – a survey done independently, we have got consistent and persistent growth in ‘People’s wish to recommend’. We are not going to stop working on our customer care and it’s going to improve further.

TDB: Is there a change of thought on the inside as far as future product lines from Fiat Chrysler India is concerned?

KF: We have looked at all our products in the market and compared with those offered by other brands. That’s when you start getting an indication of where the market is migrating to. From a future product perspective, we are more in line. We have got a very unique proposition as we are making some very good cars – beautiful handling, solid on the roads with a real sense of security and unbelievable safety record. Although we make cars for the Indian market, we follow stringent European safety standards while manufacturing them. That isn’t the case with most other manufacturers. We do confess that our products do not have the same resonance that they once had with the Indian consumers. Obviously, what we need to do is learn from our core DNA. And the next generation products have to do a better job in having a broader appeal.

TDB: What’s being done to improve Fiat Chrysler’s brand perception in the Indian market?

KF: Coming to the brand, we are working on a new campaign, which is being finalised at the moment. We have done a lot of analyses to understand what people think about us and what they perceive our weaknesses to be. And you could say, that these three pillars (dealership, product and brand) will help us lift our position and perception in the market.

The Indian consumer market is unique. Elsewhere, you need a right product for the right people, with the right brand resonance. But in India, it’s completely different. The market pace is set by a couple of brands and manufacturers and that defines what everybody else is trying to do. The mass desire for prominent brands is an interesting and dynamic feature of the consumer market here. And this means that the potential for us is immense.

TDB: That Fiat is present in India in a JV with Tata Motors indicates that the country is not very important in the company’s scheme of things. Is it?

KF: It’s a good question, but a wrong assumption. There are positives and negatives about JVs. JVs allow you to get into the marketplace and develop, like set up of manufacturing plants. The decision to get into a JV was taken years ago, and the reasons may not be the same if we opt for a JV in future. It was the right decision at that time and we have worked hand-in-hand on the distribution front. Our relationship now is at the manufacturing plant level. I suppose, it’s a very precious relationship when you are using the same plant and it suits you to have that split in terms of volume and capacity and we are positive about our long term ties.

TDB: Can you rate your satisfaction with your manufacturing partner Tata Motors on a scale of 1 to 10? Tell us about the factors that you are not very happy with in the JV.

KF: If I ask you to give me a public rating of your spouse’s performance, you wouldn’t. Would you? At the end of the day, a fruitful business relationship needs a level of respect and understanding from both sides. We are still on that journey in some aspects and will continue working closely. So, we will work together and find out directions. We have got an amazing manufacturing facility in Ranjangaon (located 50 km from Pune) which match international standards. If that was a snapshot of the relationship, then I feel that it is delivering exceptional results. Our strategy is to improve what we are doing and our utilisation of the factory is the direct result of our relationship.

TDB: FCA Group’s last annual report mentions the ‘reliance on joint ventures in certain emerging markets’ as a risk to its growth. Given that, why doesn’t it go on its own?

KF: It is all about embracing changes in a joint facility. If we suddenly want to build a far bigger motor range in the space that has been alloted in the plant to us, and our JV partner can allot some of their unutilised space to us for some reason at their end, then we can take the space if it is highlighted in the agreement. Isn’t that fantastic? I think what’s highlighted in the annual report is that we want to grow fast in emerging markets and with our JV partners, we have similar aspirations. It’s about how quickly you can get yourself a great plant that can deliver with significant capacity. But yes, the limitation is that both of you cannot grow at the same time. If both of you plan to or actually do, one of you will have to take over the whole plant while the other will have to build another facility elsewhere. We have not reached that state with Tata Motors yet. We both are working out on how best we can use our alloted spaces.

TDB: Tell us a bit about Fiat’s manufacturing facility at Ranjangaon.

KF: The manufacturing plant has a capacity of one hundred and thirty-five thousand units and both parties (Fiat and Tata Motors) are using a fraction of it. Since we are bringing in the Jeep to the Indian market, besides launching it here, we plan to manufacture it as well at our Ranjangaon facility. It’s the right time to do so and we are already working on dealer appointments, etc. We are really excited about that. But we are not going to stop here. We will continue to add more variety to our offerings in India.

TDB: Looking back at the fact that you’ve worked with several luxury car brands in the past, what do you think about the Indian consumer?

KF: Yes, the Indian consumer is very unique. As an experience, such a level of passion for one’s vehicle(s) doesn’t exist anywhere else. There is a very big difference in the way people treat their cars here – a premium car is seen as luxury and the luxury ones are considered to be super luxury or exotic. People display such a passion not just for Fiat but for other brands as well. That makes the Indian consumer very interesting!

TDB: Reports suggest that the company is making massive investments to roll out the Jeep brand in India. By when do we expect that? Do you plan to export Jeeps manufactured in India?

KF: We plan to go live at the beginning of next year, probably around Delhi Auto Expo 2016. The Jeep will be manufactured in India at our Ranjangaon facility and talking about exports, the same standard vehicle will be exported to the markets around the world.

TDB: How happy are you with the tax and regulatory environment in India? Have draconian duties on auto imports been a major hindrance for you?

KF: I have worked in a number of markets and at the end of the day, the regime exists for everyone. Millions of people will argue that improving certain elements in a country’s tax system will increase sales, while others will argue against it. I have worked in markets where you manufacture and you can also avail duty credits against the car you import. And I think that works well. It allows companies to globalise their operations and help them become a global export hub for certain models. But that’s not really possible here because of the magnitude of duties on imports. I’m sure the argument is that the more we protect the Indian automobile industry against imports, the more cars we can manufacture here and that’s true. Undoubtedly, to encourage domestic manufacturing, the import duties in India are far higher than they need to be.

TDB: Speculation is rife that the Indian government plans to provide incentives to owners to discard old, polluting vehicles. Do you expect such schemes to become a game-changer for the auto sector as a whole and Fiat in particular? What’s your experience with similar schemes in other markets?

KF: There are a couple of cities in India that have got pollution issues. More than the new cars in the markets, the older vehicles are contributing to pollution in these cities. The government’s desire to move out the older cars is completely logical. But those vehicles need to go somewhere. A lot of Asian countries dump older cars in the African states, which are also emerging markets. It is nothing but a toxic dump as there are no regulations for such cars. When I was in Africa, I found this so wrong. This is very important for an industry to know, one that is actually manufacturing a product that does not have a life cycle. At the end of the day, we should be conscious of what we are doing about that product. So, in Singapore, they crush the worst and export the best.

Also, there should be a flexibility given to cars of specific interest. There is some beauty to an old motor car, if it is kept in a good condition. When we look at an old Fiat going down the road, we probably say, “Wow, look at that!” We shouldn’t scrap all the cars. As far as India is concerned, there are less developed markets as well where these cars can be exported. But logically stated, yes old, polluting vehicles should be taken off the road. There needs to be a formal recycling programme.

Like I said, we as an industry have a role to play. If our mobile phone’s battery is thrown away, it is going to poison the environment in some way. There has to be some sense of responsibility. As we know, a phone’s battery life doesn’t last more than a few years. Beyond this, its performance starts diminishing and we are forced to replace it. The auto industry is no different today. So, we all have a responsibility – not just to make more efficient and beautiful vehicles, but also to make those that don’t ruin the environment. And sales will automatically follow if automakers adhere to such ethical standards.

TDB: In the last few years, Fiat hasn’t really won the crown in India. Now that you have taken over, what are your realistic expectations?

KF: We went through all of that in my opening answer. The reasons I’m here is to do exactly what you are asking. The company is not happy with the current state of affairs at Fiat India. We deserve to be in a much better position. Some ingredients, methodologies, programmes and campaigns that we adopted in the past didn’t really work as imagined. We have invested heavily and are still doing so. In all respects, be it manufacturing, introducing new models, selling in India or even exporting, our commitment to India is massive.