In what could be the first sign of differences between Mahindra and Mahindra Ltd (M&M) and its partners Renault SA and Nissan Motor Co. that are together setting up a facility near Chennai to manufacture cars and other vehicles, the Indian company has decided against making any of its vehicles in that factory, according to a person familiar with the development.
The joint venture firm is yet to acquire the land on which the factory is to come up.
The person, an auto industry executive who did not wish to be identified, said M&M had initially planned to make tractors and utility vehicles at the factory, but was asked by Renault and Nissan to give up its claim to any part of the 400,000 vehicles a year capacity of the plant, which is to start production in 2009. The factory was to have had the capacity to make 50,000 tractors a year. M&M has a 50% stake in the joint venture with the other two companies holding the remainder.
A file picture of Mahindra Group managing director Anand Mahindra (left) with Renault chief executive Carlos Ghosn (Picture by: Ashesh Shah / Mint)
M&M officials, including Pawan Goenka, president (automotive) of the company, were unavailable for comment on Thursday. The company’s spokesperson responded on Friday to questions mailed on Thursday and said M&M had no comment to offer. Renault and Nissan officials in India declined to comment on the status of the joint venture.
“I don’t have a clue about this and you will find no one in India to comment on this issue,” said Neeraj Garg, director (sales and marketing), Nissan Motor India Pvt. Ltd. “We are very, very bullish on India,” he added.
Nissan India’s managing director Y. Motihiro, who is in Japan, could not immediately be contacted because the company is closed till Monday.
Meanwhile, on Friday evening, PTI, citing unnamed sources, said M&M had pulled out of the joint venture. The news agency claimed M&M had done this because Renault and Nissan had firmed up other partnerships in India, including one by the former with Bajaj Auto Ltd to make an inexpensive small car.
Mint could not independently verify this.
M&M and Renault have an existing joint venture that makes and sells the latter’s low-cost sedan Logan. Nissan recently signed an agreement with truck maker Ashok Leyland Ltd to set up three joint ventures.
The auto industry executive said Renault and Nissan had edged M&M out because they “believe that they will be able to sell more than what they initially planned to sell here”. He added that the two companies had requested M&M to manufacture its utility vehicles elsewhere.
The executive said M&M would now make these at a new plant that it is setting up in Maharashtra’s evolving auto hub, Chakan, near Pune. The plant is being set up to manufacture a range of trucks in collaboration with US-based truck manufacturer International Truck and Engine Corp. The Chakan plant is coming up on 700 acres of land acquired from the Maharashtra Industrial Development Corp. (MIDC). MIDC officials, who did not wish to be identified, said M&M is acquiring additional land in the region.
According to vendors associated with the two companies, the Renault-Nissan combine is preparing a line-up of 11 products for the Indian market, including a compact car from Nissan’s portfolio and variants of the Logan from the Renault stable. The products will be launched over the next few years. Of the 11, Nissan, Japan’s third largest car manufacturer, will bring in eight models and Renault will drive in with three, including a compact commercial vehicle built along the lines of its existing Kangoo van, which is sold in Europe and other parts of the world. It may also launch a small car based on its Logan platform, the vendors said on condition of anonymity.
The vendors claimed that Nissan was in discussions with them for two small cars it planned to bring to India.
The auto industry executive said the Nissan-Renault combine’s move has put a spoke in M&M’s original plan to gradually shift the production of a number of its new vehicles to Chennai.
The company currently has manufacturing facilities at Kandivili in Mumbai (for pick-up trucks), Nashik in Maharashtra, where it manufactures the Logan in collaboration with Renault, Igatpuri in Maharashtra (for engines), and Haridwar. Another manufacturing facility that it owns at Zaheerabad in Andhra Pradesh has been transferred to its joint venture with International Trucks.
Meanwhile, the M&M-Nissan-Renault joint venture’s plans to start production at the new plant in Chennai by 2009 may not work out, with the land acquisition process still incomplete. Tamil Nadu’s special secretary (industries) S.S. Gopalakrishnan said 600 acres of land has been acquired at Oragadam, near south Chennai, for the project and that the acquisition of the remaining 500 acres is under way and is expected to be complete by the end of February.
The project is already behind schedule by at least seven-eight months.
Renault India’s managing director Sylvain Bilaine had said in a November interview that the joint venture partners are struggling to meet the deadline for the project. The Renault-Nissan combine has also expressed interest in acquiring additional land to house a vendor park in the vicinity of the new plant. Tamil Nadu’s land acquisition process, like that of many other governments, has run into trouble with affected land owners forcing the government to go slow.