The Hindu Business Line : Where three is company

Production scheduling and equitably sharing of manufacturing facility in the new joint venture of the triumvirate — M&M, Renault and Nissan — will be a challenge.

A joint venture between two car manufacturers involving sharing equity in a single facility for joint manufacturing is big news in the automobile industry.

An alliance like that among three manufacturers is path breaking.

So, it was news of global significance when early last week Indian utility vehicles maker Mahindra & Mahindra (M&M), French auto major Renault and renowned Japanese vehicle manufacturer Nissan announced a joint manufacturing alliance. Renault and Nissan already share a unique relationship and also have the same CEO, Mr Carlos Ghosn, heading the global alliance of the two companies.

The new joint venture of the triumvirate has decided to set up a manufacturing facility in Chennai. When commissioned, the new plant will have an installed capacity of four lakh units per year, seven years after its initial production.

While M&M and Renault had announced the setting up of a new JV plant in November last year, the possibility of Nissan too joining the alliance had been in doubt.

Nissan, Renault and Mahindra have now committed to investing a minimum of Rs 4,000 crore ({euro}686 million or $902 million) in the proposed site during the next seven years, with an equity holding of 50 per cent by Mahindra and 50 per cent by Renault and Nissan together.

The project will provide for production of each carmaker's vehicles, plus a powertrain facility for Renault and Nissan. A range of products suited to the requirements of Indian customers will be manufactured at this new site. Production is expected to begin in the second half of 2009.

Production scheduling and equitably sharing the same facility to produce vehicles of two very different brands can be a difficult task. Under this alliance, the logistics of producing vehicles of three different brands will be even more mind-boggling.

Flexible assembly line

But Nissan and Renault are masters at ensuring the assembly lines they set up are extremely flexible and cost effective to be able to manufacture different vehicles in a single line. For example, Nissan's Kyushu plant at Fukuoka province in Japan has one line that can manufacturer an amazing eight different cars and utility vehicles.

Nissan also has the back-end infrastructure and logistics in place to be able to manufacture only that many cars as to have an inventory of four days' deliveries at any point in time for the Japanese domestic market.

At the time of joining the alliance, M&M reiterated that it has no intentions of getting into the manufacture of passenger cars.

So, the company will continue to focus on manufacturing utility vehicles and the ones that are likely to make to the Chennai plant will be based on a new platform.

The current vehicles and the new vehicles on the new `Ingenio' platform will be manufactured at the company's Nashik plant.

The more interesting aspect of the threesome manufacturing alliance will be the choice of vehicles that the two global companies will make for the Indian market. Of course, the car that Renault will be launching through its contract manufacturing arrangement with M&M is the Logan sedan. Market rumours also have been pointing to the MCV, family van Logan Steppe variant that could be manufactured at the Chennai facility.

But both Renault and Nissan have a clutch of small cars that could be considered for a debut here.

Renault has small cars such as the Clio, Twingo and Modus. And Nissan has such small cars as the Note, the CubeCubic, the March, the Tiida, the Otti and the Pino (twin of the new Suzuki Alto) that can all be very relevant and viable to produce in the Indian context.

Officials from Renault and Nissan have said that the two companies have to leverage synergies globally to be able to meet their individual sales and profitability targets, even as they maintain their individual identities.

The two companies will do the same even for their Indian operations and sharing a common platform could also be one of the tactics that they would want to employ to save costs. For M&M, this could be a great learning and collaborative experience. For the customer, the alliance's well-researched and relevant products will be worth waiting for.

S. Muralidhar

More Stories on : Cars | Alliances & Joint Ventures | Mahindra & Mahindra Ltd

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