Auto Components

Mahindra Renault on schedule with Logan

Mahindra Renault, the 51:49 joint venture between Mahindra & Mahindra and Renault, is on schedule with the Logan project. The car will debut by mid-2007. Pawan Goenka, president, automotive sector, M&M and Rajesh Jejurikar, managing director, Mahindra Renault along with Patrick Pelata, executive vice-president (products) of Renault, chaired a press meet with Indian journalists in Paris to give an update of the project.

A significant announcement by Pelata pertained to the higher localisation content in the car which is estimated to be closer to 60 percent at the time of its launch. Readers will recall that it was projected earlier at 50 percent. The partners have invested around Rs 700 crore in the plan which will see 50,000 cars being produced.

Both Goenka and Jejurikar reiterated that everything in the project was going exactly according to plan. The biggest challenge will, of course, be on the pricing front because this is where the success of the Logan will depend on to a large extent. Renault has also floated a 100 percent arm styled Renault India which is expected to play a big role in working with Nissan to source components for the India operations.

The French carmaker owns 44 percent equity in Nissan (with the latter accounting for 15 percent in Renault) but will clearly look at independent car operations in India. The bigger objective, though, will be to focus on costs and ensure that there is easy rationalisation of vendors. To that extent, there could be good business for suppliers working on the Suzuki-Nissan and Logan projects. The fact that there is tremendous focus on indigenisation can be borne by the level of increased local content in the Logan.

There is no indication what the product mix will be like in terms of the petrol, diesel ratio. However, if the current pace of dieselisation is any indication, the partners could look at a 70:30 output. Some changes will be made in the Indian offering to make it look more contemporary but keeping the price in check at every level will be top priority for the partners.

##### Who will the typical buyer of the Logan be? Clearly, this would be somebody graduating from a compact car in the B segment and looking for something affordable in the C category. The fact that there is a diesel option will be an added advantage.

The Tata Indigo was intended to meet this need and its sales have been averaging at 3,000 plus units each month. It is not going to be easy for the Logan to be positioned at the same price point of the Indigo (at Rs 4.5 lakh) but if it does, then there could be some interesting dynamics happening in the C segment.

Whether this will end up putting pressure on established B plus products like the Swift (which will be out with its diesel option towards the end of this year) remains to be seen. The Logan will certainly have the advantage of novelty and will draw a generous number of initial buyers but the bigger task will be to sustain the numbers.

The car will be sold along with the Mahindra Scorpio in retail outlets. For the moment, the joint venture will be confined to production of the Logan and its variants but this could always be extended to include other models too. It would be interesting to see then how the role of Renault India pans out in the coming years. Indications are that a larger responsibility has been planned for this company and it will not be restricted to sourcing of components.

The biggest positive about the Logan project is the renewed interest by France in India’s automobile industry. Peugeot’s departure nearly a decade ago caused a lot of bad blood among dealers, vendors and bankers but the entry of Renault could change all that. On this topic, there is a lot of talk about Citroen coming to India too but this is still not confirmed.
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