Riding on Kwid’s success, Renault to develop another global car in India

New Delhi: Buoyed by the success of its global mini car Kwid, French auto maker Renault SA is working on yet another global compact car in India entailing an investment of up to $400 million, a person with direct knowledge of the matter said.

The car, being designed and developed by the Renault-Nissan Technical Centre in Chennai, will be less than four metres in size and is expected to make its debut in the local market in 2019, the person said on condition of anonymity. Sub-4m cars attract less tax—28% GST and 1-3% cess (depending on the fuel)—compared to bigger vehicles.

The company has tried to modify its CMF-A platform, which was developed in India for the Kwid. It also plans to come out with a compact sport utility vehicle (SUV) on the platform later.

The move is aimed at consolidating Renault’s position in India and fill gaps in its existing product portfolio.

The two products will be introduced in the premium hatchback and compact SUV segments (sub-4m), said a second person in the know. “(These) are being developed at the R&D (research and development) facility in Chennai just like its successful small car Kwid,” this person said.

“The company could also showcase them as concept cars in the upcoming Auto Expo. The vendors have also been intimated about the plan. Apart from these two, Renault is also working on different other products but they are at a very nascent stage,” the second person said.

A Renault spokesperson said: “As per company policy, we cannot comment on future products; however, we can assure you that whatever comes from Renault, it will be a game changer, which will redefine the segment, or create a sub-segment.”

Sales of Kwid have started to ease and with the likely introduction of the new Alto by Maruti Suzuki India Ltd in 2018-19, competition is likely to increase. Captur, Renault’s new offering—a compact SUV—has not managed to meet expectations since it was launched in October. Sales of the Duster have also been on the decline.

To be sure, Renault’s and its chief executive officer Carlos Ghosn’s previous attempts to crack the cost-sensitive small car market had little success before they built the Kwid, which was launched in 2015. While the original Logan caught on unexpectedly in Europe, the Indian version, built through a joint venture with Mahindra and Mahindra Ltd (M&M), failed to draw customers. Renault scrapped its production venture with M&M in 2008. After that, Renault partnered with Bajaj Auto Ltd to build an ultra-cheap car to counter Tata Motors Ltd’s Nano. The project was abandoned in 2011.

Then came the Duster, which was launched in 2012 and changed Renault’s fortunes in India. And, finally, in 2015, it got its small car right.

To be sure, owing to its SUV design and localization drive (98% of its components are made in India) that brought down the cost of Kwid’s spare parts to at least 17% less than components that go into India’s best-selling car, the Maruti Alto, the French firm commands a share of around 4% in the world’s fastest growing car market, making Renault the highest selling car brand from the West in India.

Renault has achieved the feat in just five years of active operations even as its American and European counterparts, who have been in the country for longer, continue to struggle.

Puneet Gupta, associate director, automotive forecasting, IHS Automotive, says Renault is the most aggressive global carmaker in India today and can be a real threat to companies such as Mahindra and Maruti in the long run.

“In the last decade, Renault has not only been quick enough to understand the needs of the Indian customers but also has been able to develop India-centric products locally—a true example of ‘Make in India,” added Gupta.