The Hindu Business Line : Is Renault looking for a strategy shift in India?

Mumbai, Oct. 21 Renault’s multi-partner strategy in India came under the scanner on Wednesday following a statement made by its President and CEO, Mr Carlos Ghosn, at the Tokyo Motor Show.

“We have today three partners (in India). Our intention is to continue with the three but if it is not possible, I can tell you that we need at least one,” he was quoted as saying in agency reports.

This was enough to cause a flutter in industry circles here with speculation rife that Renault was going to call it quits with one of its allies here. The company already has a joint venture going with Mahindra & Mahindra to produce the Logan sedan at Nashik.

The other alliance is the one with Bajaj and Nissan to make an ultra-low cost (ULC) car, with a price tag of $2,500, scheduled to roll out of Chakan near Pune in end-2011. Nissan, Renault’s global ally, has a joint venture with Ashok Leyland to make light commercial vehicles in Chennai.

Clarification

While the market was debating which of these joint ventures would fall by the wayside, Renault made an official clarification that there was no plan or decision at this point to “cease coordination” with any of its current partners.

However, industry sources said that Mr Ghosn’s comments clearly showed that while a local ally in India was imperative from Renault’s point of view, the multi-partner approach was not going according to plan.

Nearly four years ago, at the time of signing the joint venture with M&M, there were no such issues. Mr Louis Schweitzer was the chief of Renault then and when Mr Ghosn took over, the partnership took a giant step forward with the announcement of the Rs 4,500-crore three-way joint venture between M&M, Renault and Nissan.

M&M miffed

Everything looked picture perfect till M&M decided to drop out. At that point, the story doing the rounds was that the company was miffed because Renault had also decided to team up with Bajaj Auto for the ULC car project. Sources said this issue triggered cracks in the M&M-Renault relationship.

Mahindra-Renault, the 51:49 joint venture, reported losses of nearly Rs 500 crore last fiscal and sales of the Logan have stagnated at 600 units a month.

This plant was planned with an installed capacity of 50,000 units annually and just one-third is being used now.

M&M believes that one way to boost Logan sales is to reduce its length to four metres so that it qualifies as a small car and avail itself of the eight per cent lower excise duty. The levy, otherwise, is 20 per cent and this alteration could make the Logan cheaper by up to Rs 75,000.

This is something that Renault will have to ponder over because the excise duty differential is peculiar to India in addition to the fact that the Logan, in its present form, is doing well in other markets.

Talks with Bajaj

As for the ULC car project with Bajaj Auto, the only news in the public domain is that the partners are still sorting out branding issues. Even here, rumours have been doing the rounds that a split is around the corner.

It is only in the Nissan-Leyland alliance that some semblance of progress has been achieved in terms of a timetable for the rollout.

Of course, initial plans for a new plant could give way to sharing facilities within the Renault-Nissan Chennai unit.

Related Stories:
Renault may be prompted to revive Chennai car project
Nissan Renault venture’s India plans on track