Nissan whittles Maruti pact

To tie up with Renault-M&M for new plant.

Japanese carmaker Nissan has called off talks with Maruti Udyog Ltd to set up a plant in the country for manufacturing 200,000 cars a year. Instead, it will join the alliance between Mumbai-based Mahindra and Mahindra and France's Renault SA, which owns 44 per cent of Nissan's equity.

However, Nissan remains committed to the deal signed with Maruti, under which India's largest carmaker, 54 per cent owned by Japan's Suzuki Motor, will make 50,000 cars for Nissan for exports.

"When he was here, Osamu Suzuki (chairman of Suzuki Motor) announced a Rs 9,000 crore expansion plan, including the production of 50,000 Maruti models, which were to be exported by Nissan under the Nissan brand. There is no change in this stand. Osamu Suzuki also said there were discussions between Suzuki and Nissan for Maruti to produce 200,000 cars for Nissan for the export market. This will no longer happen," Maruti Udyog Managing Director Jagdish Khattar told Business Standard.

The details of Nissan's second project with Maruti "" investment, capacity of the plant, models "" were not announced.

Nissan's decision follows a Renault and Mahindra and Mahindra announcement to build a plant in India for assembling 500,000 cars a year.

Following Nissan's announcement, the Maruti stock fell 2.75 per cent in the Bombay Stock Exchange, making it the biggest loser among the Sensex stocks, even as the Sensex rose 0.5 per cent. The Mahindra scrip, on the other hand, climbed 6.15 per cent to Rs 828.05.

The project is part of Renault's strategy to boost global sales by 800,000 cars in 2009, compared with 2.5 million in 2005, on the back of rising demand in India and other Asian countries.

"We need to do more in India and we are very confident," Renault Chief Executive Carlos Ghosn, who also heads Nissan, said at a news conference in Paris.

Today's announcements drastically expand the scope of Mahindra and Mahindra's existing agreement with Renault to build 50,000 units of the Logan, Renault's successful no-frills car, at its plant in Nashik, near Mumbai, beginning next year. Mahindra owns 51 per cent of the venture and Renault the remaining 49 per cent.

The agreement announced today envisages a new assembly plant to build the Logan and its derivatives for the Indian market. Renault will also build a powertrain factory. Production is expected to begin by mid-2009 with an initial capacity of 300,000 cars per year, which would be scaled up to 500,000 in five years.

"The facility will not only produce the Logan, but new products from Mahindra and Mahindra as well, which will include utility and sports utility vehicles," Mahindra and Mahindra's President, automotive sector, Pawan Goenka, told Business Standard.

According to today's memorandum of understanding, Mahindra and Mahindra will own 50 per cent of the joint venture. The rest will be shared between Renault and Nissan.