Jagannathan, reports on the details of the unique
three-way manufacturing joint venture between M&M,
Renault and Nissan
Some call the Mahindra-Renault-Nissan manufacturing
joint venture as a marriage of convenience. Some call
it as culmination of profitable and calculated romance.
descriptions of this unique three-way partnership that
is expected to roll out 4 lakh vehicles by 2016 are
right. What is also true is this joint venture is a
new dawn for the automotive industry in India.
for Mahindra group chairman Keshub Mahindra it is the
realisation of long dream.
years ago I signed an agreement with Renault to make
a small car in India. Its price was Rs7,000," he
signaling the dawn of a new era of collaborative manufacturing,
the 51-page memorandum of understanding (MOU) with the
Tamil Nadu government was signed at 6:00 am on 26 February
coming together of the three auto companies has several
advantages. According to officials, Renault will contribute
its expertise in engineering, manufacturing and adaptation
to meet customer requirements; Mahindra will contribute
its in-dept understanding of the Indian market and supplier
base and Nissan brings opportunities for exports.
as the combined investment is a huge sum, the parties
to the deal were able to wrest some interesting tax
incentives from the Tamil Nadu government.
per the broad announcement the three companies will
jointly set up a vehicle manufacturing facility / complex
on 925 acre at Oragadum near Chennai. The proposed facility
will roll out vehicle models decided by the respective
companies (Mahindra & Mahindra, Renault and Nissan)
and also make power train for Renault and Nissan. Land
acquisition is expected to be over soon the handed over
to the company in two months time.
first car is scheduled to roll out of the factory sometime
during the second half of 2009. While the initial capacity
and the outlay are under tight wraps, seven years after
the initial roll out, the plant is expected to have
a total capacity of 4 lakh units. And over the next
seven years-by 2012- the investment in the plant is
expected to be in the region of Rs4,000 crore.
Mahindra group will hold 50 per cent in the yet to be
named manufacturing company and the balance will be
equally shared by Renault and Nissan.
Uday Y Phadke, president, finance and legal affairs
and member of the Group Management Board, Mahindra &
Mahindra, "The equity quantum of the proposed company
is not yet finalised though the stake percentage has
been frozen. The amount of equity and debt will depend
on the production volume of each partner." Adding
further he says, "The group''s flagship company
Mahindra & Mahindra Limited will be investing in
the new venture."
parties to the deal are unwilling to talk individual
production numbers. However according to Mahindra Renault
Limited''s website, the 51:49 joint venture to roll out
the low-cost sedan Logan (the two will launch more models
later) and "a vehicle assembly plant is being setup
for the purpose with an initial capacity of 3 lakh cars
to officials, the companies would first source from
the domestic auto component industry and later see the
possibility of bringing in their overseas vendors.
Tamil Nadu''s industries secretary, Shaktikanta Das,
"We have earmarked 400 acres for component vendors
to set up base near the new project." While welcoming
the project one auto component maker wryly commented,
"Indian vehicle manufacturers hike their customer
prices quoting increase in input costs. But most of
the component suppliers have not had a price increase
in the past four years. It is profitable for us to export.
And one more company is being added to the list."
that as it may, the proposed manufacturing company will
have a four-member board of which two will be from the
Mahindra group and one each from Renault and Nissan.
The chairman and chief financial officer of the proposed
company will be from the Indian group while the foreign
companies will be in-charge of production and engineering
to Dr Pawan Goenka, the chairman designate of the proposed
company and president (automotive) and member of the
Mahindra & Mahindra''s group management board, the
Oragadum facility will make Renault cars on the Logan
platform. Initially the plant will assemble the completely
knocked down (CKD) unit imports for the Indian market.
Goenka also said that Mahindra & Mahindra will make
only its utility vehicles here and not the new car model
that is being developed under the codename Ingeno.
will target the ''B'' and ''C'' vehicle segment and also
look at export possibilities," says Carlos Tavares,
member of the board, executive vice president, Nissan
Motor Company Limited.
to the marketing of the vehicles made at Oragadum, the
Mahindra and Renault branded vehicles will be distributed
through their exiting dealerships while Nissan will
develop its own dealership network.
Renault and Nissan using the Indian group''s shoulder
to fire at the domestic market? Years ago Ford Motor
Company came to India as a joint venture with Mahindra
group and subsequently bought out the latter''s stakes.
Mahindra, "Joint ventures are like marriages. Some
lasts for ever and some result in a divorce. All the
three use each other arms and shoulders to fire."
his views on the deal an industry official says, "It
is an interesting deal. As I see it, Maruti Udyog and
Hyundai Motors will be challenged only by Toyota Motors
as and when the later starts manufacturing mini car."
the impact will be largely for Ford India and General
Motors. However the later is putting up a small car
plant in Maharashtra which would cushion the impact
of the new development. According to a car dealer, between
Ford India and General Motors, the former is more profitable.
between European and Japanese cars, Indian car buyers
generally prefer the later as they are cost, fuel efficient
and of good quality. The market has seen failure of
couple of European car models like Fiat, Peugeot and
failure of the three cars has nothing to do with the
product," says an industry official.
Fiat''s Punto if launched next year will find the going
model was popular four years ago in Europe. "The
track record track record has shown that Indian customer
is not prepared to buy anything but the latest release
in the US, UK and other countries," he adds.