Renault's alliance with M&M may be on rocks

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Renault's alliance with M&M may be on rocks; Bajaj has branding woes


Renault’s efforts to make a dent in the Indian car market through alliances may come unstuck with simmering differences between the local partners and Europe’s third-largest carmaker coming to the fore in a dramatic way. ( Watch ) Pune-based Bajaj Auto, which is partnering Renault in the ultra-low cost car project, is likely to spurn the French firm’s invitation to replace Mahindra & Mahindra in Mahindra-Renault, the joint venture that sells the Logan car in India, said a person with direct knowledge of the matter. Bajaj is already experiencing branding problems with Renault in the low-cost car venture and sees little point in joining with Renault in another struggling venture, he said, requesting anonymity.

Renault, which has several pending problems with partner M&M, had approached Bajaj with the offer some time ago. Mahindra Renault, a 51:49 joint venture between the two partners, is struggling to sustain volumes due to uncompetitive pricing. M&M is also unhappy with the joint venture and is seeking greater control on product re-engineering. “The company will not be unhappy to walk out of the JV,” said a person aware of the development who asked not to be named. The Logan experience prompted M&M to seek greater product flexibility in its truck-making venture with ITEC. Renault, meanwhile, officially maintains that it has no plan to change partners in India.

“Renault denies the rumour that there is any move to ask anyone, Bajaj Auto or otherwise, to take over the M&M stake in MRPL. Renault remains committed to the Indian market, as well as to the Mahindra Renault JV and is committed to getting back on track,” said a Renault India spokesman in response to an email query from ET NOW. Mahindra-Renault failed to price its Logan sedan competitively because of the 20% excise duty on the car that measures 4,247 mm in length. Excise duty on cars measuring up to 4 metres is just 8%. Mahindra’s demand to reduce the car’s length was turned down by Renault, which was not keen to tweak a global platform.

Logan’s sales have been slumping in India, a rare situation for one of Renault’s best-selling products worldwide. Sales crashed 71% in September to just over 500 vehicles. Its April-September sales at 2,901 units are less than a third of the 9,217 units sold in the year-ago period. An M&M spokeswoman also denied any knowledge of the development. “Mahindra is not aware of any dialogue that Renault may have with any organisation, including Bajaj. We are currently in discussion with Renault on the way forward for the Mahindra Renault JV,” she said. A Bajaj spokesman refused to comment on the matter.

The Mahindra-Renault JV was announced in 2005. Set up with an initial investment of Rs 700 crore, it planned to crank out 50,000 Logans from M&M’s Nashik plant. The JV was quickly followed by the announcement that Renault and Nissan would invest Rs 4,500 crore in a greenfield plant in Chennai. Less than a year later, Renault boss Carlos Ghosn announced the ultra low-cost car project with Bajaj.

Renault’s Indian operations are not in great shape. Its investments in the Chennai plant are frozen and the ultra low-cost car project with Bajaj is stuck due to branding and other issues. In May, Bajaj Auto MD Rajiv Bajaj told reporters that the low-cost car project has issues over branding and a final joint venture agreement has still not been signed.
Bajaj and Renault-Nissan have already had disagreements over design, positioning and some technical specifications of the new car. In March, Mr Bajaj asked for major modifications in design, positioning and other details in the project.

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I got this from Business Standard online edition..looks like Sandero is coming but one thing is sure, it won't come with M&M.

Can sever ties with any partner, including M&M: Renault
from Business Standard

Hinting the biggest drop that all is not well in its partnership with Mahindra & Mahindra (M&M), French auto major Renault today said if things did not work out, it can sever ties and may even drive in its new product in India with a different partner. Renault, which has a joint venture with M&M that sells entry level sedan Logan, has been a subject of speculation over its relationship with the Indian partner and declining sales of the car had put a question mark over the future of the JV — Mahindra Renault, in which the French firm has 49 per cent stake.

Renault has other alliances with Bajaj Auto for a small car project and Ashok Leyland through Nissan for light commercial vehicles in India. "I am not saying we will, I am saying we can. I don't want anybody to be surprised. We have today three partners (in India). Our intention is to continue with the three partners, but if it is not possible, I can tell you that we need at least one," Renault Chairman and CEO Carlos Ghosn said here at the Tokyo Motor Show.

He was responding to a query if Renault was unhappy with any of its Indian partners, particularly with M&M, following the dismal performance of Logan in India. "It is a matter of concern. Every time your sales go down on any model, not only in India, we always check why. We are going to try for some more time, if it does not work then we will go with a second car, probably with a different partner. We are in India to stay," he added.

Logan has failed to live up to expectations and sales have been on a down slide. In September itself, 510 units of the car were sold compared to 1,752 units in the same month last year. In the first six months of this fiscal, the JV sold 2,901 units of Logan compared to 9,217 units in the same period last year. Ghosn added the failure of Logan was because "it is more expensive than we hoped it would be in India, The market here is extremely sensitive to the price. Another reason is, we don't have enough localisation in India."

Renault is learning from its current experiences in India and "we are going to come with a second wave of products", he said without specifying details. The company is speculated to drive into India its other sedan, Sandero, in the near future. Ghosn said while Renault is on a learning curve through its partnerships with M&M, Bajaj Auto and Ashok Leyland, in the long run it is going to stay put with at least one of the three partners. "What I can tell you is that we are certainly going to stay with at least one of them. We may on the long run sever the relationship with one of them, so and so with another one. I can't tell you what's going to happen but we need at least one partner in India," he said.

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Wheels Unplugged Reports:

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Renault Motor finds market not feasible for Sandero

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Renault India has categorically stated that it will not be manufacturing its 5-door hatchback-Sandero, as it is finding it commercially infeasible at this point of time. It may be recalled that Renault India was earlier toying with the idea of jointly producing Sandero with Mahindra and Mahindra (M&M) from Nashik in Maharashtra, where the combine is already manufacturing its entry-level sedan-Logan.
At the 2010 Auto Expo, Renault Vice-President (Corporate Affairs and Communications) Ashish Sinharoy told reporters, “We did a detailed study on Sandero and based on the feedback it is next to impossible to launch in India. People were not happy with the design of the aforesaid car so we decided to put curtains on it.”

Meanwhile, it has also said that its JV company-Mahindra Renault- is preparing to review its business, which includes preparing a new roadmap that will be officially announced in 30-45 days. It is to be mentioned that the Indo-French company manufactures the Logan, a mid-sized sedan from a facility based in Nashik. The sales of the entry-level sedan have declined since 2008 after a good initial response. The drop in sales is mainly owing to its pricing, as at more than 4 metres in length the Logan incurs an excise duty of 20 per cent, thereby driving up the cost of its retail price. Furthermore, the Logan has received no cosmetic makeovers in its lifetime here in India. It has also not received new engines, transmissions or any mechanical upgrades.

Marc Nassif, country general manager and managing director, Renault India, said, “We will come out with a new business model. In a month or month and a half we will announce our new plans for the joint venture (JV). We had been in advanced stages of discussions with Mahindra & Mahindra (M&M) on how to go forward (with the venture) We are exploring various options for the joint venture MRPL (Mahindra Renault Pvt Ltd) as a business and Logan as a product.” However, when asked to elaborate on the measures that the JV company was exploring, Nassif declined to comment further but hinted it will come out with a resolution that would be extremely positive for both companies.

A statement from M&M said, “The Logan has very satisfied customers and enjoys a strong equity. We are confident that the Logan will be in the market and continue to sell through its current network. Mahindra and Renault will continue to work together in a positive and synergistic manner.” Currently, the joint venture has around 110 dealers across India.

Read more: Renault Motor finds market not feasible for Sandero - WheelsUnplugged Automobile Industry News
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