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Thursday, Feb 24, 2005

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`Logan is fine, but challenging time ahead'

Shyam G. Menon

Mumbai , Feb. 23

THE Logan is among the best entry level C segment cars in the world but its arrival in the Indian market two years from now may not be a totally smooth drive as rivals would have improved their product range by then, industry observers said.

"It is absolutely the right product for India," Mr Hormazd Sorabjee, Editor, Autocar India, said of the car to be introduced here by the new joint venture between Mahindra & Mahindra Ltd (M&M) and Renault.

However, by the first half of 2007, it is likely that a replacement for the Ford Ikon, a new Hyundai Accent and even a new Indica platform from the Tatas, would be there.

"That would make the situation more challenging than what it is today," he said.

Current players in the Logan's segment include the Ikon, Accent and Indigo. According to M&M's own presentation, NCAER has pegged the Indian vehicle market at near two million units by 2012, growing at a CAGR of 8.5 per cent from 2003 onward.

This financial year, total sales of cars and utility vehicles are estimated to touch 1.1 million units, almost 20 per cent higher than previous year's figure.

Over 2000-04, the car market's `A' segment shrank from 44 per cent of sales to 29 per cent, the `B' segment grew from 43 per cent to 49 per cent and the `C' segment increased from 13 per cent to 20 per cent.

The Logan is positioned at the entry level in the C segment where much of the action would be in the medium term. Industry experts agree, M&M-Renault is different from the erstwhile Mahindra-Ford given greater responsibilities with M&M and its strength in the post-Scorpio years.

However that locally strong profile would still be subservient to Renault's as it is the technology owner and the architect of the global blueprint for Logan's ascent.

As a right hand drive facility, the joint venture's markets may stay limited to India, SAARC, South Africa and South East Asia.

China, being a left hand drive market, would likely fall outside the scope of any India-based initiative.

For the same reasons, observers said, M&M would be averse to a similar tie up here in utility vehicles (UVs) as that is its core competence, where it needs ownership of product and technology.

Hence this M&M trait of learning in cars and proving in UVs, they said. A point further supported by the fact that UVs are often sold as surrogate cars.

M&M itself admits that what it learned from Mahindra-Ford was used in the Scorpio.

There is also another likely, though unspoken, angle. M&M has traditionally been the dominant UV player in the domestic market and hence the one, along with Tata, to yield space every time a new player entered.

The leading entry-level `C' segment car today is Tata Indigo and undoubtedly Logan will carry the battle to that product.

For a cost to itself that may well be a fourth of the total investment for the new joint venture, M&M would have opened up a new flank in the competition's side while itself continuing the traditional UV war. Does this partly explain M&M's on-off affair with car manufacturing?

This thesis was rubbished as "negative."

But there was admiration for the Mahindra-Renault alliance at a larger level, especially since M&M has said it is discussing sale of its SUVs through Renault's distribution channels.

For, even if Nissan's products are taken into account, the Renault-Nissan grouping does not have SUVs at the Scorpio's price point.

"It appears to be an excellent fit," Mr Sorabjee said of M&M and Renault.

`No plans to exit Ford'

"WE have a portfolio investment in each other,'' Mr Anand Mahindra, Managing Director, M&M, said of equity stakes maintained by Ford and M&M in each other's operations.

As with any such investment, decisions would be made on how best to harvest it. "There are no current plans to exit," he said.

A Renault stake in M&M has not been part of talks for the new joint venture. "It's not on the horizon either," he said.

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