Financial Daily from THE HINDU group of publications
Thursday, Feb 24, 2005
Corporate - Alliances & Joint Ventures
Mahindra ties up with Renault Joint venture to make Logan cars in India
(From right) Mr Anand Mahindra, Vice-Chairman and Managing Director, Mahindra & Mahindra, with Mr Luc Alexandre Menard, Senior Vice-President, International Operations, Renault, and Mr Alan Durante, Executive Director & President, Automotive Sector, Mahindra & Mahindra, at a press conference in Mumbai on Wednesday. Paul Noronha
Mumbai , Feb. 23
MAHINDRA & Mahindra Ltd (M&M) on Wednesday announced a 51:49 joint venture with Renault, to produce and sell the latter's car, Logan, in India. Separately, discussions are on between the two parties to sell M&M SUVs abroad through the French auto major's distribution channel.
At a press briefing, Mr Anand Mahindra, Vice-Chairman & Managing Director, M&M, said the company's focus continues to be its SUV business; the arrangement with Renault is for a specific product, due for rollout here in the first half of 2007. "This is a single product alliance for making the Logan. That's it," said Mr Alan Durante, Executive Director, M&M.
The Logan, an entry-level C segment car with its production hub currently in Romania (where Renault owns local car-maker Dacia), is being primed for a global production figure of 600,000 units in the next two-three years.
In Asia, Iran is set to host a 300,000 unit-strong capacity for the car by 2006. It compares with Mahindra-Renault's 50,000 units.
Asked, Dr Pawan Goenka, M&M's Chief Operating Officer (Automotive Sector), discounted the regional impact of this Iranian capacity citing the development of the Logan's right-hand drive model with Mahindra support in India, and hoped for export to the SAARC markets and South Africa..
The Logan's multi-location manufacture (in Romania, Russia, Morocco, Columbia, Iran and India) should help tackle the problem of a strong euro as production bases outside can be tapped for component sourcing, Mr Bharat Doshi, Executive Director, M&M, said. The car is expected to host 55-60 per cent local content within two years of launch. Renault will examine parts distribution from India.
In Romania, the Logan costs 6000 euros (around Rs 3.45 lakh), said Mr Luc Alexandre Menard, Renault's Senior Vice-President (International Operations). No insight was offered on expected petrol/diesel sales ratio here though the Logan currently sports only a petrol engine and India has a growing diesel car market.
The Rs 700-crore joint venture (investment will be a mix of equity and debt) with M&M as majority partner is different from its earlier a 50:50 partnership with Ford, Mr Mahindra said. Ford India Ltd (FIL), where M&M's equity stake is now 15 per cent, had M&M participation limited to HR and communication.
In the new venture, M&M will additionally handle finance and distribution. Renault will be responsible for purchase, engineering and quality. The Indian company will have four board members to Renault's three, the former appointing the managing director, the latter the non-executive chairman. While Ford still has a 5 per cent equity stake in M&M, there is no proposal for Renault to do a similar take.
The Logan will be manufactured for a fee at M&M's Nashik, Zaheerabad or Haridwar facility and sold under the Mahindra-Renault brand. Similar clarity on branding for M&M vehicles likely to sell through Renault's channels could not be had. "It is too early," Dr Goenka said when asked if the channel being explored was that of Renault alone or the larger Renault-Nissan group's.
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