On this day in 2010: When Mahindra bought out Renault’s stake in their joint venture

On April 16, 2010, Mahindra & Mahindra acquired 100% in Mahindra Renault, its joint venture with the French carmaker, thereby becoming the first Indian company to buy out a multinational in any JV.

Takshak Dawda By Takshak Dawda calendar 16 Apr 2016 Views icon28359 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
March 21, 2005: Keshub Mahindra, chairman of Mahindra & Mahindra, and Louis Schweitzer, chairman & CEO of Renault Group, signed in Bombay, a framework agreement for setting up a JV in India, Mahindra

March 21, 2005: Keshub Mahindra, chairman of Mahindra & Mahindra, and Louis Schweitzer, chairman & CEO of Renault Group, signed in Bombay, a framework agreement for setting up a JV in India, Mahindra

Six years ago, on April 16, 2010, Mahindra & Mahindra (M&M) bought out its French partner Renault’s 49 percent stake in the Mahindra Renault Pvt Ltd joint venture, which used to manufacture the entry level Logan sedan. 

Interestingly, nearly six decades ago in 1959, Renault had signed an agreement with M&M to bring a car to India that would cost Rs 7,000. The plan never took off, largely due to prevailing policies of the Indian government at that time. Since then, Renault just did not seem interested in India. Its French counterpart, Peugeot was more aggressive and was among the earlier entrants to set up operations here once the Indian economy opened up in the early 1990s. It was also the first to leave less than four years later and contributed precious little to the image of French automakers. 

In 1994, Renault and M&M carried out clinics for the R17 and R19 but neither was found suitable because of the high price-tag. The Indian company had meanwhile tied up with Ford Motor Co in a new joint venture while Renault just did not seem to have the right product for India. It was content to enter into a supply arrangement with M&M for the Scorpio’s petrol engine.

However, all that changed on March 21, 2005, when Keshub Mahindra, chairman of Mahindra & Mahindra, and Louis Schweitzer, chairman and CEO of Renault Group, signed in Bombay, a framework agreement for setting up a joint venture in India called Mahindra Renault Ltd. In 2007, the JV introduced the no-frills Logan which seemed to be the best bet for emerging markets like India. In some ways, it had been a homecoming of sorts for Renault.

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To say that the Logan was a significant project for the duo is a bit of an understatement. Up until then, Mahindra had only been present in the SUV and tractor segments and was a market leader in both. The Scorpio, launched in 2002, was a product that helped the company establish a new brand identity. Mahindra was banking on the Logan, which was manufactured at the company’s Nashik plant, to do the same in the passenger car segment.

However, the Logan never really took off in India. Sales plunged from just over 14,000 units in 2008-09 to 6,225 units in 2009-10. However, the car did make some headway in the private taxi market selling an estimated 500 cars to Meru Cabs. The Logan was also exported. In October 2008, the company received an additional export order for 500 GLSx petrol-engined Logans for South Africa, taking the total shipments to 1,000 units.

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On April 16, 2010, the joint venture came to an end. Both the companies announced the restructuring plans for their 51:49 JV.

The framework agreement signed then allowed M&M to take over the operations of the company by buying Renault’s stake in the JV.

The joint venture’s flagship car, the Logan, which was commercially launched in 2007, was rebadged as the Verito. While the petrol variant was launched at Rs 4.28 lakh to Rs 5.69 lakh for the 1.4-litre and 1.6-litre engines respectively, the diesel 1.5 version ranged from Rs 5.47 lakh to Rs 6.44 lakh. Between July 2007 through to April 2010, the Logan sold around 44,000 units in India and 2,600-odd units overseas.

Mahindra’s buyout of the Renault’s stake was a first of sorts for the Indian auto industry wherein an Indian company bought a multinational for the first time in any joint venture.

Renault’s independent entry in India

The first step for Renault following the break-up of the Mahindra joint venture was deemed extremely crucial as the French carmaker did not have a single dealer.

The plan was to have 70 dealers by 2013-14 which was termed the first phase. Renault’s first model launch was the Fluence saloon in May 2011, followed by the Koleos SUV in September. Both the Fluence and Koleos were assembled from CKD kits in Renault-Nissan’s Oragadam plant outside Chennai.

In 2012 Renault launched three new models – the Pulse hatchback in January, the Duster in July 2012, and the Scala in August 2012. The Duster was instrumental in turning around the fortunes of the company in India and was responsible for catapulting the carmaker to the list of India's top 10 car manufacturers. The compact SUV crossed the sales mark of 100,000 units within two years of its launch.

However, the biggest success story of the company has been the Kwid. Launched on September 24, 2015 at a starting price of Rs 2.57 lakh, Renault India’s entry-level car got 25,000 bookings within 15 days and over 50,000 bookings in almost a month. Since then till March 2016, the Kwid has sold over 45,000 units and has 125,000 bookings in the bag.

What drew prospective buyers first to the Renault Kwid is its aggressive pricing made possible by a high 98 percent localisation content. To sum it up, the Kwid won 2016 Autocar India’s ‘Car of the Year’ award, while Gérard Detourbet was Autocar Professional’s 2015 ‘Man of the Year’ for leading the creation of the game-changing hatchback.

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