Fiat Ends Distribution Deal with Tata

Fiat SpA, whose sales in India have languished for years, says it will end its distribution agreement there with Tata Motors Ltd. and set up its own network of Fiat dealers in the country.

Both companies in recent months have expressed frustration with the venture's tepid results. Fiat sold 16,100 cars in the fiscal year ended March 31, down 24% from the previous year despite 5% growth in India's auto market.

The partners will continue their manufacturing joint venture in Ranjangaon near Pune. In the six years since Fiat India Automobiles Ltd. was formed, the venture has built only 190,000 Fiat and Tata cars and 337,000 engines. But Fiat announced in January that will make the 1.3-liter, four-cylinder MultiJet engine at the plant, which has annual capacity to make 300,000 gasoline and diesel powerplants.

Fiat says the 178 Tata dealers who have sold its vehicles will be invited to open separate Fiat showrooms and form the backbone of the new dealer network. The company sells vehicles under its namesake brand in India and has said it wants to introduce its Alfa Romeo, Chrysler, Dodge and Jeep makes there.

Fiat began planning the new dealer network last year. But when the CEO of its India unit said in September that the companies would dissolve the sales tie, the Italian company denied it.