Renault has repeatedly denied a local media report that it is seeking to replace its current partner Mahindra & Mahindra (M&M) in Mahindra-Renault, the joint venture that sells the Logan car in India.
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Pune-based Bajaj Auto, which is partnering Renault in a separate ultra-low cost car project, is likely to spurn the French firm’s invitation to replace M&M, a person “with direct knowledge of the matter” told the Economic Times of India (ETI). Bajaj is already experiencing branding problems with Renault in the low-cost car venture and sees little point in joining with Renault in another struggling venture, the unnamed source said.
But Renault repeatedly denied it planned to change partners in India.
“Renault denies the rumour that there is any move to ask anyone, Bajaj Auto or otherwise, to take over the M&M stake in MRPL. Renault remains committed to the Indian market, as well as to the Mahindra Renault JV and is committed to getting back on track,” a Renault India spokesman told ETI.
The paper said Renault, which has several pending problems with partner M&M, had approached Bajaj with the offer some time ago. Mahindra Renault, a 51/49 joint venture between the two partners, is struggling to sustain volumes due to uncompetitive pricing.
M&M is also unhappy with the joint venture and is seeking greater control on product re-engineering.
The ETI said Mahindra-Renault failed to price the Logan sedan competitively because of the 20% excise duty on the car that measures 4,247 mm in length. Excise duty on cars measuring up to 4 metres is just 8%. Mahindra’s demand to reduce the car’s length was turned down by Renault, which was not keen to tweak a global platform.
Logan’s sales have been slumping in India, a rare situation for one of Renault’s best-selling products worldwide. Sales crashed 71% in September to just over 500 vehicles. Its April-September first fiscal half year sales of 2,901 units were less than a third of the 9,217 sold in the year-ago period. Production was down 68% according to a Reuters report.
“The company will not be unhappy to walk out of the JV,” another unnamed source “aware of the development” told ETI.
The Logan experience had prompted M&M to seek greater product flexibility in its truck-making venture with ITEC, ETI said.
An M&M spokeswoman also denied any knowledge of the development. “Mahindra is not aware of any dialogue that Renault may have with any organisation, including Bajaj. We are currently in discussion with Renault on the way forward for the Mahindra Renault JV,” she told ETI. A Bajaj spokesman refused to comment.
“I totally deny the way it has been reported. We are working at the moment on the way forward,” Mahindra Renault’s chief executive officer, Nalin Mehta, told Reuters.
“There are no plans to end the venture … at least nothing that I am aware of.”
The Mahindra-Renault JV was announced in 2005 and planned to build 50,000 Logans a year at M&M’s Nashik plant.
That JV was quickly followed by the announcement that Renault and Nissan would invest in a greenfield plant in Chennai. Less than a year later, Renault boss Carlos Ghosn announced the ultra low-cost car project with Bajaj.
Renault’s Indian operations are not in great shape, according to ETI. Investments in the Chennai plant are frozen and the ultra low-cost car project with Bajaj is stuck due to branding and other issues. In May, Bajaj Auto MD Rajiv Bajaj told reporters that the low-cost car project has issues over branding and a final joint venture agreement had still not been signed.
Bajaj and Renault-Nissan have already had disagreements over design, positioning and some technical specifications of the new car. In March, Bajaj asked for major modifications in design, positioning and other details in the project.
