French auto giant Renault SA and Mahindra & Mahindra, India''s biggest maker of sport-utility vehicles and tractors, have entered into a joint venture to manufacture the $6,000 Logan sedan beginning in 2007. The joint venture will be set up at a cost of euros125 million (Rs720 crore).

The two companies plan to use India as a hub for exporting the Logan to the other countries in the sub-continent as well as other right-hand drive markets. Renault is also exploring the option of sourcing components from India, according to Louis Schweitzer, chairman and CEO of the Renault Group.

The companies are also hoping that the Indian operations are instrumental in increasing the worldwide sales of the Logan from 2.5 million cars to 4 million cars by 2010, said Schweitzer.

The joint venture company would be the key to the scaling up of operations. The Indian plant, will begin rolling out the Logan in 2007, and would have capacity to produce 50,000 cars with 50 per cent local content to start with.

Schweitzer said the Logan, produced in Romania and due for production in Russia, Morocco, Columbia and Iran, was the first modern, reliable and affordable car in its class and the best value for money car in the world. It is due to be on the roads in Russia, Morocco and Colombia in 2005 and by next year in Iran.

Schweitzer reportedly believes that one million Logans could be sold annually by 2010.

According to Schweitzer the Logan project was founded on such goals as steep price reduction (as much as 30 per cent being original target), no compromise on reliability, lesser number of components for easy maintenance and sturdy build.

Renault interest in India, says Logan, was based on the certainty that the country would emerge an industrial power and a populous market.

The company also plans to set up a Renault Technical Centre in India to support the joint venture with M&M.

Renault had announced details of the agreement last month and is another overseas carmaker seeking to enter India or expand its presence. Nissan Motor Co., 44 per cent owned by Renault, in November won the Indian government''s approval to set up a local unit.

Renault began producing the Logan in September 2004 at its Dacia plant in Romania and took in 40,000 orders through December.

The Logan will be marketed under the Mahindra Renault brand name and sell a right-hand-drive version of the car, which is being developed by the French company for India. Schweitzer said that as of now the joint venture is meant only for manufacturing and marketing the Logan and all future plans for the JV will depend on the success of the car in the Indian market. He refused to comment on group company Nissan''s plans for the Indian market. The Logan will be produced at one of M&M''s three facilities. While M&M is likely to add Logan to its existing distribution network Renault will help M&M market and distribute its vehicles in overseas markets where the latter does not have a presence.