M&M, Nissan, Renault ink pact to set up Chennai plant

The consortium will invest Rs 4000 cr, one of largest in Tamil Nadu.

Laying all speculations to rest, Japan's Nissan Motor Company has decided to make cars with Mahindra & Mahindra (M&M) and Renault of France. The consortium will invest Rs 4,000 crore in a tripartite integrated facility in Tamil Nadu to make passenger cars and utility vehicles.

However, it is not clear clear how the three companies would be splitting among them the total investment corpus, which is spread over seven years.

In equity terms, M&M will own 50 per cent in the venture, while Renault and Nissan will hold the rest.

The plant is coming up on a 1,100 acre site at Oragadam, 60 km from Chennai. The investment is considered to be one of the largest in Tamil Nadu.

The consortium today signed a 51-page memorandum of understanding (MoU) with the Tamil Nadu government in the presence of state Chief Minister M Karunanidhi.

The manufacturing complex will include a powertrain facility for Renault and Nissan, and will have a production capacity of 400,000 units per annum.

The unit, which will manufacture both Renault and Nissan models, is expected to roll out the first vehicle in the second half of 2009. It is expected to provide direct employment to 5,000.

The consortium will come out with multi-branded vehicles and bring together a lot of synergies and economies of scale for each company, said Keshub Mahindra, chairman, Mahindra and Mahindra, at a press conference, also addressed by top Renault and Nissan officials.

He also that those displaced due to the acquisition of land for the project would be relocated at a place convenient to them. The yet-to-be named JV would also start vocational training schools to train the students and absorb them in the facility.

However, no details of the products to be manufactured at the facility were revealed.

While M&M will look at manufacturing multi-utility vehicles, Renault will focus on products under the Logan platform initially. Nissan, meanwhile, will look at manufacturing compact cars for India and a few models for exports.

The Renault cars manufactured at Oragadam will be sold through M&M's domestic sales network, while the Nissan models will be marketed through a separate distribution network, details of which are yet to be finalised.

A Mahindra official called the JV a complementary alliance and ruled out any conflict of interest.

However, it is also likely that the car models produced out of the Oragadam facility may end up in direct competition with each other.

The board of the JV company will comprise four members, two from the M&M and one each from Renault and Nissan.

Pawan Goeka, president, automotive sector, M&M, has been appointed as the chairman of joint venture.

Chennai was chosen due to its well-established component industry, skilled workforce and port connectivity, the companies said.

Carlos Tavres, executive vice-president, Nissan, said the manufacturing unit would use the local vendor base and work hand-in-hand with the auto component industry in the state.

Shaktikanta Das, secretary - industries, government of Tamil Nadu, said the state government had separately earmarked 200 acres of land for various auto component manufacturers and suppliers after a discussion with the Mahindra-Renault-Nissan triumvirate and the local component industry.

Calling it a historic occasion in the industrial history of Tamil Nadu, Das said the Rs 4,000 crore investment by the Mahindra-Renault-Nissan combine would trigger further investments to the tune of Rs 10,000 crore in the state by the auto component industry.

According to rough estimates, the value addition to the state's GDP will be Rs 18,000 crore per annum, Das said, adding, "Over a period of time, we see job potential for 40,000 people, emerging from this investment."