The three year-old tripartite alliance between the Franco-Japanese car maker Renault-Nissan and Bajaj Auto to produce an ultra low-cost car (ULC) priced at $2,500 to rival Tata Motors’ Nano seems to be jinxed. Renault India managing director Marc Nassif told FE that the December 2012 deadline to introduce the proposed low-priced car is nearly unachievable since Bajaj Auto is yet to showcase the car. If the deadline is not met, it would be the second time since 2008, the year the alliance was first announced.
?We are yet to see the car from Bajaj. In that case how do you expect us to put it out on the table and launch it by December 2012?? asked Nassif. Reiterating Renault’s India plans, Nassif said even if the alliance with Bajaj Auto does not materialise, the French car maker would not hesitate to go solo with the production of the ULC. He added that Renault’s assessment of the ULC market in India remained very optimistic and the company had enough financial and technical know-how to roll out a similar car. ?We have enough able engineers with potential to develop a similar car. We will be present in this category with or without Bajaj,? Nassif said.
This is the first time the French carmaker has come on record to suggest that meeting the 2012 deadline would be very tough, something auto analysts have been fearing for long. Some media reports had suggested earlier that Renault was considering giving its final nod to the ULC project once it had seen the product from Bajaj.
When contacted Bajaj Auto’s managing director Rajiv Bajaj told FE that he did not want to comment ?on what someone else has said?. In January, Bajaj had told this newspaper that the platform for the ULC would be used to roll out other passenger vehicles, but he had declined to give any specifics owing to the sensitivity of the information. This was read by several car market watchers as a signal that Bajaj did not need Renault-Nissan to power its dream to enter the passenger car segment.
In a media report on Tuesday, Bajaj was quoted as saying that the company was developing the car platform for its own needs, and that the deal with Renault-Nissan was the ?icing? on an already viable project. He also indicated that the company is on track on prototype to be shown to Renault-Nissan.
Leader of the automotive practice at PricewaterhouseCoopers Abdul Majeed said constant delays in rolling out the car would impact both Bajaj and Renault-Nissan. ?The low-cost car was going to be Bajaj’s entry into the passenger car segment while Renault-Nissan always wanted to have a very small car to rake in volumes. In that context both players would lose out if the agreement falls,? he said.
As per the initial understanding in 2008 between Renault-Nissan CEO Carlos Ghosn and Rajiv Bajaj, the three partners were supposed to enter into a joint venture with the Franco-Japanese alliance holding 50% stake while the remaining was going to be with Bajaj Auto. However, soon after that differences surfaced, especially over the look and design of the car which forced a new arrangement in which Bajaj’s responsibility was restricted to merely producing the car. It was believed that Bajaj wanted to downplay the price factor of the car while focusing more on mileage.
?India is a big market especially in the R2-4 lakh category. In our estimates there can be at least two cars in this space,? added Nassif. Car sales in India jumped 30% last fiscal to reach 1.98 million units. However, owing to rising interest rates and fuel prices, sales in the first two months of the current fiscal have shown signs of moderation. While in April overall sales grew 14%, in May sales remained almost flat at roughly 5-6%.
?Before coming to India Ghosn had told me to make a living out of the Indian market,? shares Nassif. Over the next one year Renault is going to introduce at least two small cars in the price bracket of R4 lakh and above. The company currently has one manufacturing facility at Chennai which it shares with its alliance partner Nissan. The plant has a total capacity of two lakh units which is being doubled to four lakh. The JV has so far invested Rs 4,500 crore into the facility.