Mumbai: Allies Renault SA and Nissan Motor Co. are firming up plans to shift a large portion of their design and development engineering work for future automobile models to India as they attempt to ride out the global economic downturn, people familiar with the development said.
Simultaneously, Nissan Motor, Japan’s third largest auto manufacturer, is also working on a new line of small cars that it plans to design and develop in India for both local and global markets, said the people who didn’t want to be named.
The Renault-Nissan alliance is battling a global sales slowdown as consumers stay away from automobile showrooms in the face of economic turmoil triggered by the US subprime crisis. Car sales are also slowing in India, Asia’s third largest economy, where Renault-Nissan is delaying vehicle production projects, Reuters reported on Tuesday.
But Carlos Ghosn, chief executive officer of the alliance, is a believer in India’s talent for frugal engineering, proof of that being the Renault-Nissan joint venture with two-wheeler manufacturer Bajaj Auto Ltd to sell a cheap car priced at as low as $2,500 (Rs1.23 lakh) starting in 2011. The project with Bajaj would go ahead as planned, Reuters cited Nissan as saying.
Renault Nissan Technology and Business Centre India Pvt. Ltd, the research and development wing of the duo’s business venture in India, plans to scale up the original plan of employing some 1,500 people in five years, according to vendors familiar with the development who didn’t want to be named.
Plans are now being discussed to shore up its engineering strength from the current 1,100 to 2,000 in 2009, they said.
Sumitha Ramamoorthy, the spokesperson for Renault Nissan Technology and Business, said there is no change in its original hiring plan. The unit was set up to provide engineering and business services support for Renault and Nissan facilities around the world.
People familiar with the developments at the Renault-Nissan alliance’s Chennai operation said the move to increase engineering headcount in India is in line with the alliance’s long-term strategy of building a strong local engineering design and development team that will help develop cars at a lower cost and drive them to the market faster.
“Manufacturers looking to develop a car in India from scratch can do it at one-fourth the cost of other markets such as Japan,” said one large vendor to auto companies, including Mahindra and Mahindra Ltd, Maruti Suzuki India Ltd and Toyota Kirloskar Motor Ltd.
Maruti Suzuki is engaged in a project that could make a locally developed car a possibility in two-three years, the vendor said. Tata Motors designed and developed the Indica from scratch locally, and Mahindra and Mahindra the Scorpio, although they “went shopping for some help to design studios,” this vendor said.
Cutting production and technology costs is key to survival for car makers that are under pressure from shrinking sales and profitability.
“Foreign players come into India with long-term plans,” said Vaishali Jajoo, senior research analyst at Angel Broking Ltd. “While the current review of their (Renault-Nissan) plans is part of the crisis arising from the global economic crisis, it will help them go back to extensive market research so that they get their product planning right.”
At least two vendors who didn’t want to be named said that talks are at a preliminary stage for a new Nissan small car, which will be positioned between the Micra model the Japanese auto maker plans to manufacture in India and the ultra low-cost car with Renault and Bajaj.
“Given the economic situation and the shift in consumer preference for smaller, more economical cars, the alliance wants to develop such a platform which is where the volumes will come from,” one vendor said.
Nissan Motor India Pvt. Ltd spokesperson Ananya Handa denied that there are any plans other than those already announced for the company’s Indian operation.
Renault India, meanwhile, is still awaiting management approval for at least two of the three models that it planned to launch in India.
Vendors who have had extensive discussions with the company on a van and a cross-over variant of the Logan (code named R90 and H79) said they hadn’t yet received even a request from the company to quote prices.
“The timeline we were given for issue of request for quotations for parts supplies was latest by September but there is suddenly no discussion on this,” one vendor said.
Renault’s only independent project in India, other than the Logan sedan with Mahindra and Mahindra, now seems to be a premium hatchback, work on which is in progress, according to vendors.
Renault India vice-president, corporate affairs, Ashish Sinha Roy, declined to comment on plans for individual models. “We are yet to finalize any models for India and all I have to say is that we will have four platforms, yet to be decided, for this market,” he said.