Joint venture to split manufacturing and marketing functions.
Carlos Ghosn, CEO of Renault and Nissan, today announced a final agreement with Bajaj Auto to produce an ultra-low-cost car in 2012, a year later than planned and said all outstanding issues with its partner have been resolved.
The two companies had signed an understanding in 2008 for a 50:50 joint venture, with Nissan and Renault as co-partners with the Pune-based two-wheeler maker. The same structure will continue.
Ghosn, who called an impromptu press conference today on the sidelines of the India Economic Summit, said Renault had resolved all outstanding issues with Bajaj Auto. “According to the agreement, the design, engineering, sourcing and manufacturing will be handled by Bajaj Auto while marketing and selling will be done by the Renault-Nissan alliance,” he added.
Ghosn also said the brand under which the car will be sold will be selected by the Renault-Nissan alliance. Rajiv Bajaj was not interested in branding the car, he added.
Asked why he was leaving the branding to Renault-Nissan, Rajiv Bajaj, managing director, Bajaj Auto, said: "It's not polarised. We have found a solution that will meet the expectation of the customer, while simultaneously fulfilling the aspirations of all three partners. That is the highest level of innovation at the level of the business model itself.” He, however, declined to elaborate.
On why marketing has been given to the partners, Bajaj said: “We haven’t. Having said that, are people and markets really different in most parts of the world? I don't think so.”
Bajaj, however, clarified that the financial equity structure of the car project would be unchanged.
Ghosn also declined to comment on whether the car would stick to the initial price point of $2,500 (over Rs 1 lakh), but said, “The car will be most competitive in terms of running cost. It would be much better than the 20 km per litre offered by our competitors.”
On whether the market would be saturated by 2012 when the alliance launches its car, he said “Today the size of the market in India is huge and will see huge growth in ten years. So, to talk that India will achieve saturation is not justified.”
The car will also be exported to emerging markets.”Our major target is India but we will also export the car to many developing countries around India and also to Africa and South America,” Ghosn said.
Sources said there have been differences between the French-Japanese combine and its indian partners on a raft of key issues from branding, styling to the price point. Renault-Nissan was keen on a low-cost car closer to the Nano (Rs 1 lakh), Bajaj was more interested in a car with the best mileage in the country (30 km a litre) even if that meant the price tag would be higher. Industry sources said Bajaj was looking at a price tag between the Nano and the Maruti Alto and is willing to go it alone.
Bajaj’s concept has been to create the most fuel-efficient car on Indian roads by using the digital twin spark ignition (DTSi) technology which it uses in its two-wheelers. The strategically positioned twin spark plugs inside the cylinder can also be altered to either generate higher power or greater fuel efficiency.
Just a few weeks ago Ghosn had said it was keen to continue with at least one of its partners in India -- Bajaj Auto, Mahindra & Mahindra and Ashok Leyland -- in the long run.
Ghosn’s India plans first hit rough weather in January last year when Mumbai-based utility vehicle maker Mahindra & Mahindra decided to back out from the Chennai-located tripartite joint venture company to manufacture passenger cars.
Though Nissan and Renault went ahead with their plans the shortage of funds following M&M’s withdrawal slowed the progress. The plant with a capacity of 400,000 cars will roll out its first Nissan cars in May 2010.
Meanwhile the Nissan joint ventures with Chennai-based Ashok Leyland for commercial vehicles also hit financial problems. The result is that the vehicles that were supposed to come out of a new manufacturing facility will now come out of the Ashok Leyland facilities.
The third venture Mahindra-Logan has also not taken off with the company selling only 400 units in October this year compared to 1,068 vehicles last year in the same month. With falling car sales there have been concerns in the industry about its future.
