New Delhi: Renault SA, Nissan Motor Co. and Bajaj Auto Ltd said in a joint statement that they would collaborate to produce a small car that would cost around $2,500 (Rs1 lakh), making it the second car in the world and in India with ambitions to be the cheapest four-wheeler on the road.
The three firms will set up a joint venture company in which India’s No. 2 motorbike maker, Bajaj, will hold the single largest majority with half the ownership, while partners Nissan and Renault will hold a quarter each. On sale from 2011, the cars—some 400,000 of them each year—will be produced in Maharashtra, at Chakan, near the existing manufacturing facilities of both Bajaj and Renault.
No investment details were shared by the firms, whose car will compete directly with that of Tata Motors Ltd—at least on price. Tata unveiled the world’s cheapest car, Tata Nano, in January after four years of research and development because Ratan Tata, 71, chairman of the firm, the largest vehicle maker by sales in India, promised a so-called “people’s car” to his countrymen.
Tata, in January, said that while he stuck to the Rs1 lakh promised price tag, “there will come a time when we will not be able to hold to a price that we have emotionally held ourselves to.”
And though the Bajaj-Renault-Nissan alliance is some years away from selling the car to Indians, analysts are already saying such competitive pricing could eat into profits of the joint venture and that it is going to be a challenge to maintain this price.
“Their strategy would be similar to that of Tata Motors (for the Nano). We could see a number of variants. While the base model would not be profitable, they are likely to make money on the higher models,” said Piyush Parag, analyst at Religare Securities Ltd.
Ambitious plans: A file photo of Renault-Nissan chief executive officer Carlos Ghosn and Bajaj Auto Ltd managing director Rajiv Bajaj.
The Bajaj-Renault-Nissan promise of a car that costs $2,500 at its cheapest, delivers on the widely stated ambition of Carlos Ghosn, 54, who heads both Renault and Nissan, to make a “frugally engineered” cheap car using India’s ability to cobble together a vehicle with limited and inexpensive material. Renault already produces a no-frills sedan, Logan, in India with partner Mahindra and Mahindra Ltd, and Ghosn was one of the few people who believed that Tata could make a Rs1 lakh car. The price tag for the new car is a departure from what majority partner Bajaj Auto’s 41-year-old managing director, Rajiv Bajaj, had said barely five months ago. In January, while unveiling an early prototype of the planned small car, Bajaj said, “Bajaj is about making automobile products that make money,” and said he wasn’t going to promise a Rs1 lakh car.