The Hindu Business Line : Renault-Nissan, M&M working out strategies

LOGAN UNIT: (from Left) Mr Anand Mahindra, Vice-Chairman, & Managing Director, Mahindra Group; Mr Ashok Chavan, Minister for Industries, Maharashtra; Mr Chhaggan Bhujbal, Minister for Public Works; Mr Vilasrao Deshmukh, Chief Minister of Maharashtra; and Mr Carlos Ghosn, CEO & President, Renault, at the inauguration of the Logan plant at Nashik on Wednesday. — Shashi Ashiwal

Nashik April 4 The unique three-way alliance between Mahindra & Mahindra (M&M), Renault of France and Japanese car major Nissan is still being planned, but the companies are already putting in place product strategies that will give them independent identities.

Nissan Motors will manufacture two small cars initially only for export markets. It plans to bring in its existing small car platforms.

The 50:25:25 joint venture between the three companies is expected to commence production from the Chennai plant by 2009.

Fresh from rolling out the Mahindra Renault Logan from the Mahindra & Mahindra plant here, Mr Carlos Ghosn, CEO and President of the Renault-Nissan combine, said the Chennai plant of the three companies will for the moment manufacture vehicles from the Logan platform. These will include four derivatives built on the same platform. The engines for these vehicles will also be made in Chennai.

Mr Ghosn also said Nissan will first export the cars manufactured at the Chennai plant and only later will they be launched in the domestic market. Nissan and Renault may also adopt autonomous, independent strategies, and Nissan may also look at the possibility of entering into a separate marketing arrangement with a different Indian company, he said.

Mr Ghosn also said Renault is working on a new low-cost car platform like the Logan's and said the company may consider using the expertise of M&M for developing and engineering such a vehicle.

M&M contract manufactures the Renault Logan at its production and assembly facility here. The two companies also have a marketing company Mahindra Renault Pvt Ltd for the new Logan.

Describing the partnership between the two companies at a media interaction here, Mr Ghosn said, "We will be partners with M&M for the foreseeable future and as long as the partners understand each other and get along well by adding value to the relationship, there is no reason to look for other possibilities now."

Learning the Indian way

"We want to use the Logan project to learn about India and about the potential of an Indian company in enabling low-cost manufacturing. There is a fundamental difference in attitude to cost savings between western companies and Indian companies and this is what we want to capture with this partnership," he mentioned.

Talking about Indian manufacturing, Mr Ghosn said Indian companies can show companies from the developed markets the way with their frugality in manufacturing and management. This trait is unique to many Indian companies like Mahindra, Tata Motors and Bajaj.

"So, it is very difficult to develop a low-cost, frugally manufactured passenger car without getting into an association with an Indian company. Their sense of definition of the product and their understanding of the market make it an attractive proposition to ally with Indian companies," the CEO of Renault-Nissan said.

Component sourcing

Renault and Nissan are also looking at sourcing components from Indian suppliers, including M&M's Mahindra Systems and Automotive Technologies. On the sourcing advantages that Indian suppliers offer, Mr Ghosn said that on average the cost of components manufactured in India is about 30 per cent cheaper than similar parts made in Europe or Japan. Sourcing quality parts from Indian suppliers is obviously an attractive proposition due to this kind of cost competitiveness.

To be a serious competitor in India, the cost of the vehicle has to be kept within $3,000. "Indian suppliers and manufacturers like M&M can help us learn how to keep costs low and, yet, make an attractive profit," Mr Ghosn said.

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