The Hindu Business Line : M&M exit from joint venture: Benefits deferred

Mahindra and Mahindra’s official announcement that it is deferring investment in the three-way joint venture with Renault and Nissan at Chennai is unlikely to have a very significant impact on its immediate prospects as the project is still at a very early stage.

But it must also be added that there were quite a few benefits expected to flow in for M&M from this venture, for which the company may now have to line up alternative plans.

Improve utilisation

One, the greenfield plant was to have flexible assembly lines that would have provided additional production capacities for some of Mahindra’s new vehicle lines. The company now plans to improve utilisation at its Chakan plant and is simultaneously evaluating a separate plant at Oragadam (Chennai) to enhance its capacity.

Two, the joint venture of M&M and Renault (which currently uses the company’s Nashik facility to produce the Logan) was to use this joint facility to produce vehicles on the Logan platform for the Indian market. With M&M pulling out, it remains to be seen how the two companies redraw their manufacturing plans for this foray.

Three, Renault-Nissan had proposed setting up of a power-train manufacturing plant close to the new facility to supply engine and gearbox requirements for the Logan and its derivatives. Given the French carmaker’s expertise in this area, M&M could have sourced future power-train requirements for its utility vehicles and other new launches from this facility. Whether M&M will still be able to do it despite backing out of the venture will have to be watched.

Exploring options

Moreover, by aligning with the Renault –Nissan brand, M&M stood to gain much in terms of access to latest technology and design architecture.

But the latest acquisition of Italy-based auto design and engineering firm Grafica Ricerca Design indicates that M&M has decided to explore options beyond Renault-Nissan to strengthen its design capabilities and hence, its access to the European market.

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