Renault to go solo on low-cost car, plans two models

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SummaryAfter having ended its alliance with Bajaj Auto to develop a small car in the sub-R2-lakh category, French carmaker Renault has now decided to develop it for the Indian market along with its global alliance partner Nissan.

After having ended its alliance with Bajaj Auto to develop a small car in the sub-R2-lakh category, French carmaker Renault has now decided to develop it for the Indian market along with its global alliance partner Nissan. Also on the menu now is another small car priced at R3.6 lakh which would compete with the likes of Maruti Suzuki India’s WagonR and Zen Estilo and Hyundai Motor India’s i10 and Santro.

For the low-cost car, sources said Renault is working towards an approximately R2.1 lakh price target (3,000 euros), which puts it between the Tata Nano and the popular Maruti Alto 800. To be developed with Japanese alliance partner Nissan.

The car is expected to hit the roads by end-2014 and will be manufactured at the group plant in Chennai. In fact, Nissan's Datsun will also launch a similarly priced model by the same time, the mechanics of which could be shared.

The second small car, with a higher price target of about Rs 3.6 lakh (5,000 euros) is also being developed alongside and will be priced below the Renault Pulse (the rebadged Nissan Micra).

Sources said Renault, which recently tasted success with the launch of its compact sport utility vehicle (SUV) Duster, is keen to make its presence felt in the small-car market since this is where volumes in India are. For instance, small cars (hatchbacks) account for 65% of the 2-million domestic car market. This segment itself is broken up into three sub-groups – micro, mini and compact, and Renault aims to have a product in each category.

However, officials at Maruti Suzuki and Hyundai Motor said on condition of anonymity that for any new player now to penetrate the small-car market would be very difficult considering the wide range of dealer network it requires. For instance, the dealer network of around 80,000 that Maruti has today in the country due to its early start is still the double of what Hyundai Motor has even though it entered the country with its small car Santro in 1998.

When contacted, a Renault spokesperson said, “All we can share with you is that there are plans for a car below the Pulse but it is at a very early stage of consideration so (it is) difficult to comment on the time or share any other details.”

Renault had started work on the low-cost car with Bajaj Auto in 2009 and officially announced it in 2010. Bajaj was to develop the car under its expertise of 'frugal engineering', which would then be badged by Renault-Nissan and sold through the latter's network. However, by 2012 Renault had opted out of the tie-up.

VG Ramakrishnan, managing director, South Asia at Frost & Sullivan, said that the market for a low-cost car may hardly exist today but will likely develop over the next four to five years when buyers of bikes and second-hand cars start taking the segment seriously as an alternative.

“It is tough to get features, fit and finish at the price point. For success in the low-cost car segment, it really depends on how you position the product – there is an image problem, you can't sell it just as a cheap car,” he said.

The Chennai plant is the first joint production facility in the world for the Renault-Nissan alliance, well known as a manufacturer of low-cost cars with brands such as Datsun and Dacia under its fold. In fact, the Logan (now sold as the Mahindra Verito) and Renault Duster are actually both sold under the Dacia brand in Europe, positioned below Renault's price range. Nissan's Datsun brand is also expected to be launched in India by 2014 with three entry models.

With an investment of about Rs 4,500 crore and a strategy to make India an export hub for low-cost and small cars, the Chennai facility is now close to reaching its 400,000-unit annual production capacity. With several new volume models on the way, the group expects to double annual output to 800,000 units by 2016-17. This entails a new facility, for which it has held initial talks with Gujarat government officials.

Lone driver

* To develop a car in the sub-R2 L category

* To place it between Nano and Alto 800

* Plans another car in price range of R3.6 L

* To take on WagonR, Estilo, i10 & Santro

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