Move appears inevitable to boost localisation content, for cost control.
To support their mega car production plans in the country, French car maker Renault and Japanese auto giant Nissan seem likely to set up an engine and transmission facility that would entail further investment.
Both initiated work on the Rs 4,500 crore, 400,000 units per annum joint venture plant at Oragadam near Chennai in June last year. This was after the share in investment amongst the partners was rearranged after the withdrawal of utility vehicle maker Mahindra & Mahindra from the originally tripartite venture.
As both Renault and Nissan will be launching volume generating vehicles, including compact cars and sedans, over the next two to three years, they are also in the process of finalising the idea for an engine and transmission plant.
Currently, Renault imports all its three engines (petrol and diesel) for the Logan sedan (built jointly with Mahindra) from Romania and Spain, as volumes of the car are significantly low. Since the localisation content is low, it has pushed up overall cost of the car.
Kiminobu Tokuyama, managing director and CEO, Nissan Motor India, said: “Our current plan is to utilise a capacity of 2,00,000 and (later) 4,00,000, which is our commitment to the government of Tamil Nadu. We are not discussing product specification or product details as yet....(but) soon, I believe, we will start discussing some of the product specifications, such as engine capacity, transmission.”
According to experts, typically a, engine plant with a size of 4,00,000 units or more will require an investment of a minimum of Rs 1,500 crore.
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The joint venture Renault Nissan Automotive India (RNAIPL) is a high volume project, comprising sales in not just the domestic market but exports as well. Both companies have expressed keen interest in taking advantage of the low cost of manufacturing in India and shipping production to markets abroad.
Earlier, US auto giant Ford Motors signed a memorandum of understanding (MoU) with the Tamil Nadu government for setting up a 250,000 engines a year capacity unit, primarily to assist the company’s compact car, Figo, while increasing the localisation content to be price-competitive.
Although Nissan hasn’t revealed price details of the compact car it intends to roll out in May next year from Chennai, the vehicle will need to have localisation content as high as 80 per cent to compete effectively with peers such as the the Suzuki A-star and Hyundai’s i10.
Similarly, Renault’s compact car, sedan, derivatives of the Logan and other products of Nissan, which will come out from the same plant, will have to be priced competitively.
The proposed engine plant of RNAIPL will cater to requirements of both companies, although the power, performance and character of the engine will be tuned to suit the basic needs of the typical vehicle.