Ghosn looks for more partnerships in India

Ghosn looks for more partnerships in India

In a move signalling India’s growing importance in Renault-Nissan’s game plan for growth, the two firms are looking for more partnerships in India to add to the four they already have in Asia’s third largest vehicle market.

Carlos Ghosn, chief executive of the combine who was on a one-day visit to India to give momentum to two partnerships, said he’s scouting for more partners to make Renault SA’s light commercial vehicles and passenger cars for Nissan Motor Co Ltd. Ghosn termed India one of the most important markets to drive growth in the next few years.

In a bid to crack the top selling category of vehicles in India, the compact car, Renault-Nissan will partner with India’s second largest motorcycle maker Bajaj Auto Ltd, which will lead the project to develop an “ultra-low cost" car. Renault already has a tie-up with Mahindra & Mahindra Ltd (M&M) to make its Logan sedan in Indian and is building a manufacturing facility with Nissan and M&M in Chennai. When all the proposed alliances are finalized, the combine will be the overseas car maker with the most partnerships in the country. The proposed car with Bajaj, to cost about $2,500, will take on India’s Tata Motor’s Co., which is planning to release a car in that price range next year, making it India’s cheapest.

“Can we do it? I suspect we can. If competition can do it, there is no reason we can’t," Ghosn said. Bajaj “fits in perfectly... (and is) as committed to this project as Renault and Nissan".

He, however, declined to reveal details of how the venture would be structured. A feasibility study is right now at an advanced stage examining issues of price, design, styling, power and other crucial factors, he said. “We hope to have a clearer picture in the next few months since we intend to have the car out by end 2010," Bajaj Auto managing director Rajiv Bajaj said.

Ghosn, credited with pulling out Nissan from the brink of bankruptcy, started his morning in Chennai announcing a $500 million investment jointly with Ashok Leyland Ltd, for making trucks. In the afternoon, he was met at the Pune airport by Rajiv Bajaj and flown by helicopter to the heavily robotized motorcycle plant at Chakan, a few miles from the city centre, that makes 1 million units a year. Ghosn started his factory visit with a short ride in an auto rickshaw—Bajaj’s most profitable vehicle, estimated to have operating margins of around 30% by analysts.

Ghosn said he chose Bajaj for the proposed affordable small car venture because of its high productivity, quality and one of the highest operating margins in the industry.

Bajaj’s Chakan plant was set up by Rajiv Bajaj, in the late 90s, when he started overseeing the business run by his father. At the time, Bajaj, was predominantly a maker of scooters and falling sales were denting the firm’s profits. Credited with turning around the fortunes of the firm by focusing on motorcycles, which were gaining in popularity, Rajiv Bajaj introduced a high level of automation in the shopfloor, reducing head-count and improving productivity. About 1,600 vehicles are made at Chakan per person each year. The plant is also where the company is incubating its low-cost car project and a new plant for the car is likely to come up alongside the existing motorcycle plant.

A team comprising Carlos Tavares, executive vice president (business strategy and product planning), Nissan, and Renault India managing director Sylvain Bilaine later met with counterparts from Bajaj, who will steer the low-cost car project .

The $2,500 car, meanwhile, is the subject of all focus at Bajaj Auto, with managing director Rajiv Bajaj saying that seven different teams are now on the job working out details from quality to styling and other details. A new research and development centre is coming up at its Akurdi plant where it recently shut down production.

“We have limited experience in four-wheeler designing, especially a car, so we will set up and expand a body and chassis engineering team, which we hope to have in place by December," he said. “We hope to add value across the entire supply chain from our vendors to our technology right down to our dealers and distributors," he added.

Replying to specific queries on the ultra low-cost car, Ghosn said Bajaj was also the ideal partner because it has a proven track record in the three-wheeler business. “It is better to envision this car as an upgradation of a three-wheeler rather than the down-gradation of a four wheeler. It is easier to work that way and Bajaj has the same motivation on this front that we have at Renault and Nissan."

While Ghosn and team indicated that they would be happy enough for Bajaj to provide the engine and other critical parts of the venture that will take on the Rs1 lakh car from Tata Motors, the chief executive of Nissan and Renault declined to comment on the branding of the proposed product. “We don’t generally like two different badges on the same product as a rule," he said.

53-year old Ghosn spelt out his mantra for keeping his multiple business partners in India happy by saying, “I believe in keeping things clear and non-fuzzy about their (partners) individual roles".