Finally, the three-way alliance between Nissan, Renault and M&M has been formalised. The combine today announced a JV to set up a greenfield automobile plant in Chennai at a total cost of Rs4,000 crore. Production would start as early as the second half of 2009 and the plant would reach a peak capacity of 400,000 units per annum within seven years after initial production.

Ever since M&M and Renault announced their JV to build a new plant in India, it was speculated that Nissan would join the alliance at a later stage. Nissan had dropped its earlier plants to set up a new Indian plant in partnership with Suzuki and had stated that the company is studying the merits of joining Renault and M&M. Renault owns 44 per cent of Nissan which in turn holds a 15-per cent stake in the French automaker. Both companies are headed by Carlos Ghosn as CEO.

The Chennai plant would build passenger cars for all three partners under their respective brands. The unit would also make transmission systems for Nissan and Renault. M&M would hold a 50-per cent stake in the venture while Nissan and Renault would hold the rest.

Though no details have been announced, it is expected that the first cars to roll out would be variants of the low-priced Logan sedan. Renault and M&M have a separate JV to manufacture and market the Logan in India and the car is expected to hit the market next month. Future variants of the Logan may include a hatchback and a multi-purpose vehicle or a station wagon. Renault may look at assembling some of its other models like the Clio hatchback, Megane premium hatchback and Laguna sedan from semi-knocked down (SKD) kits.

M&M is likely to utilise the Chennai unit to produce the next generation of SUV model Scorpio. It is the best selling mid-priced SUV in the domestic market and is finding increasing acceptance in overseas markets. M&M has plans to introduce the model in the highly competitive US market and has already finalised a distributor. M&M may also build its under-development UV model, code named Ingenio, at the new plant.

Nissan may assemble cars at the new plant for both domestic as well as export markets. The company may look at expanding its vehicle sourcing from India beyond the existing deal with Suzuki for 50,000 units per annum, to be assembled by Maruti, for the European market. Nissan may also look at assembling some of its small car models like Moco and Tiida for the domestic market. Nissan currently sells only one model - the X-Trail SUV - in the country and is said to be readying a sedan model - the Teana - for an end-2007 launch.

Chennai was selected as the location for its well developed automotive and components industry, high education levels in its workforce and its overall infrastructure including its port facilities, an official release said. Other global automakers like Hyundai and Ford already have large manufacturing facilities near the city while BMW is setting up an assembly unit there.

The release added that Renault will contribute its expertise in engineering, manufacturing and adaptation to meet customer requirements while Mahindra will contribute its in-depth understanding of the Indian market and supplier base as well as manufacturing through years of market leadership. Nissan will contribute with worldwide export opportunities and manufacturing technologies, the release stated further.