Revisiting a joint venture agreement they signed in February 2005, automotive major Mahindra & Mahindra (M&M) and French car maker Renault on Friday said M&M has bought out Renault?s 49% stake in the loss-making Mahindra Renault Private Limited (MRPL).

The restructuring of the JV comes at a time when sales of the sole product sold under the venture, the Logan, have been steadily declining, coming down to as low as 351 units in March 2010.

According to figures from the Society of Indian Automobile Manufacturers, Logan?s sales for the April-March 2010 period stood at 5,332, against 13,423 in April-March 2009, a drop of 60%. In the two financial years 2007-08 and 2008-09, the JV is understood to have reported losses of close to Rs 580 crore. What?s worse, in 2009-10, losses are estimated to climb to Rs 700 crore. According to M&M?s annual report for FY 2009, investments in the JV were to the tune of Rs 154 crore.

The new agreement arrived between the two companies, however, has been designed to give M&M more flexibility in engineering the vehicle to suit the needs of the Indian consumer, and to enable better localisation, issues that have threatened to lead to more losses for the JV, and at one point, even derail the JV itself.

Going ahead, the unlisted company could tweak the car design to make it eligible for excise duty relief that small cars here enjoy. Renault, which entered India through the M&M tie-up to tap opportunities in the growing small car market and the ?frugal engineering? avenues here, subsequently entered, along with Nissan, into a partnership with Ashok Leyland to make light commercial vehicles. However, a three-way alliance between Renault-Nissan and M&M for a Chennai plant ran into rough weather, with M&M pulling out of the project. Renault-Nissan and Bajaj have formed another alliance for an ultra-low-cost car.

According to the new agreement between the two companies, M&M will continue to manufacture and market the Logan in India. Renault will continue to support M&M and the car through a licence agreement and supply key components, including engine and transmission. The agreement does not cover other vehicles built on the Logan platform globally, such as the Sandero. The two companies also said they will continue to explore areas of synergy for mutual benefits on several fronts.

?The new agreement between Mahindra and Renault will give us the opportunity to chart out a new strategy to help drive the Logan brand in India, which will also include engineering changes, in keeping with customer requirements,? said Pawan Goenka, president, automotive and farm equipment sectors, M&M. MRPL will now be a 100% Mahindra-owned company.

Despite the falling sales and charm for the Logan in India, the officials from the two companies had been saying that they will not phase out the car. ?Renault is fully committed to the success of the Logan in India, where it has achieved a high level of customer satisfaction. We will continue to extend our support to Mahindra to help it gain market share,? said Katsumi Nakamura, EVP, Asia/Africa for Renault.

The Logan will be marketed with the Mahindra-Renault tag till the end of this year. But over a transition period of 18 months, M&M will rename the car, which will then bear just the M&M logo, said the company in a release. Further, M&M said that the car will undergo certain modifications and the company will look at further localisation to reduce costs.

Now, with M&M becoming the 100% owner of MRPL, market observers expect certain core issues that marred the JV to be resolved. However, a few still doubt the Logan?s future in the market.