Carlos Ghosn was in India on Tuesday, juggling a lot of eggs and covering a lot of bases. The official reason for his visit was the opening of the new Renault-Nissan plant in Chennai, but Ghosn’s arrival set off a flurry of R-N related news in the Indian press.
The French-Japanese alliance has already invested USD $630 million in the plant and announced that it will bring that investment close to a billion dollars to bring capacity to 400,000 units annually by 2014. The factory will be one of four export hubs for the alliance’s global cars, starting with the Micra, whose pilot production has already begun in Chennai. The Micra, a B segment vehicle, will be exported to over 100 countries from Chennai and from plants in Thailand, China, Mexico and another country to be named later. A Nissan executive said the company hopes to be exporting 110,000 units by 2011, and that exports will eventually rise to 180,000 vehicles (while the dealer network grows from 8 to 82). Local sales targets for 2011 are 80,000 units. The Micra, based on Nissan’s V platform, will be priced between $3,600 and $4,800 dollars in India. Nissan will be introducing 9 new models in India by 2012, five of them locally assembled, including a sedan and a MPV based on the Micra.
In addition to Renault-Nissan’s in-house plans for India, they are proceeding with existing ventures with Mahindra and Bajaj. There are also reports that they are exploring a possible small car venture with CV maker Ashok Leyland. The venture would produce a car that slots between the Micra and the ultra low cost car that the alliance is developing with Bajaj to compete with the Tata Nano.
“We are not in favor of a casual encounter between two car manufacturers,” Ghosn remarked regarding joint ventures, “We are open to anything that would be of service to our strategy.. and work on a way to solidify for long-term relationship.” Regarding stories swirling outside of India, Ghosn dismissed rumors of a tie-up between Renault-Nissan and Daimler as speculation.
Ghosn added that in addition to meeting the needs of the local Indian market, it’s many partnerships there allow it to learn how to engineer things inexpensively and produce a large number of vehicle with relatively small small investments.
Mr Ghosn stressed that there was no overlap of projects between the various partnerships that Renault-Nissan had.
Ghosn acknowledged that R-N is working with Ashok Leyland on common projects. The talks have not a finalized design yet but Ghosn said that working with Bajaj on the project was not possible because they had their “hands full” with the Nano competitor.
Regarding the ULC project with Bajaj, Ghosn implied that it will be assembled by Bajaj. “It will not be assembled in the Chennai plant”, Ghosn said, pointing out that price point was critical in emerging markets, and that the car will be exported from India to other developing countries. “We will use Indian resources to be competitive in the global market,” said Ghosn. India will be Nissan’s global hub for small car production.
Though a formal agreement to create a joint venture to produce the ULC has not yet been signed with Bajaj, the two companies are proceeding with the design of the platform. Bajaj and R-N will market different versions of the same car, most likely targeting the A- and A segments. The ULC will have a target wholesale price of $2,500, about 10% higher than the sticker price on a base Tata Nano.
Concerning their other joint venture with Mahindra to produce the low cost Logan/Dacia for the Indian market, Ghosn said that disappointing sales did not jeopardize the partnership.
It is, however reworking the agreement and negotiating design changes with Mahindra. “We are obviously not very satisfied with the evolution of sales of Logan and we have shared it with M&M,” Ghosn shared. “We will continue to work to make Logan competitive,” he added. Fewer than 5,000 Logans were sold from April 2009 to Feb. 2010, down 60% from the previous year.
Localization is an issue. “We are discovering that the system of having the car in India and making all the modifications in Europe is way too long. We have a technical centre here [in India] with many engineers and are going to give them more responsibilities relating to vehicle modifications and adaptation to the Indian customer in addition to the task of localization,” Ghosn told Business Line.
While Mahindra would like to make the car smaller to qualify for small car tax benefits, until now Renault has resisted, trying to reap the benefits of a shared global platform. If the car can be shortened to less than 4 meters long, the price could drop $1,600, a non-trivial amount in India. Ghosn’s remarks about localization are seen as a sign of possible flexibility about the Logan’s size.
In the meantime, Ghosn said that the alliance is working with Mahindra to “reposition” the Logan in the market, that there were no plans to discontinue the joint venture and that the Logan will have a normal product life cycle in India.