The Bajaj-Nissan-Renault combine’s project to make the so-called ultra-low-cost car (ULC) could travel to other parts of the world as a joint venture and the car could become a global product for the firms, according to top executives of all three companies.
Mint National Editor (Corporate) Anjana Menon on the Bajaj-Nissan-Renault car
The joint venture is likely to take the vehicle to other emerging markets in Latin America and Asia, in part because Carlos Ghosn, chief executive of both Renault and Nissan Motor Co., has said that growth is no longer driven by mature markets such as North America, but by newer markets such as China and India, forcing car makers to find ways to sell more vehicles in these markets.
Ghosn is also trying to cut Renault and Nissan’s dependency on traditional markets or a single market. Car sales are already down in the US, the world’s largest car market, in the wake of a slowing economy and soaring oil prices.
Ghosn, known for the cost cutting that helped turn around Nissan at the start of the decade, said the focus of the joint venture project was to keep the cost of manufacturing of the low-cost car at $2,500 (about Rs1 lakh) per unit, implying that the sale price could move up. Pelata said the car could cost consumers between $3,000 and $4,000.
Nissan chief executive Carlos Ghosn. The manufacturing cost for the car will be $2,500 per unit, but it would be available to consumers for a price between $3,000 and $4,000
“The IPRs (intellectual property rights) of the ULC are the exclusive property of the JV (joint venture),” said Rajiv Bajaj, managing director of Bajaj Auto Ltd, which will own half the stake in the joint venture. “The ULC cannot be made outside the JV.”
The three companies on Monday signed an agreement to form a joint venture that will make 400,000 cars a year starting 2011.
However, the three firms have not yet decided whether the vehicle will carry all three brands, be sold under different brands in different markets, or have a unique brand.
The branding is “not decided yet”, said Ghosn, addressing reporters at an earnings conference in Tokyo. “Will it be the same car with different brands...still not decided. The problem is not how to market it. It will sell by itself.”
The problem, as Ghosn sees it, is how to manufacture the car at the cost of $2,500 per unit.
Both Renault and Nissan have spent years developing sophisticated highly engineered products for developed markets. To overcome what he sees as a handicap, Ghosn has put the onus of developing the ultra-low-cost car squarely on Bajaj Auto’s shoulders. The team of engineers will almost all be exclusively Indian and from Bajaj, with the French and Japanese car makers extending support only when asked.
“Frankly, we don’t know how to do this (make a car at $2,500),” Ghosn said. “You need Indian engineers, Indian manufacturing (and) Indian mindset which is frugal,” to make this car. “If our engineers are involved, it will cost more than $2,500...we want our engineers to be off (the project),” he added.
One of Bajaj’s key focuses is on engine technology, where it hopes to apply techniques from its experience in two-wheeler manufacturing. Pune-based Bajaj, known to be protective about the technology it uses in engines, is already locked in a legal battle at home with rival TVS Motor Co. Ltd over a patented engine technology. Bajaj has previously said it hopes to make car engines which are twice as fuel efficient as that of the vehicle that currently offers the maximum mileage on Indian roads.
Still, it is likely to take the help of foreign engineers in areas such as body shape, body parts, emissions technology and gear box as it has never made a car before.