Renault, Nissan scale down Chennai plan

Mumbai: The economic slowdown in India has prompted global allies Renault and Nissan to go in for one shift, rather than the initially planned two, at their Rs 4,500-crore Chennai car project.

According to agency reports, Nissan is reviewing a wide range of projects in the pipeline to reduce capital expenditure and improve its cash flow, a company spokeswoman said in Tokyo.

The car factory with Renault would start as scheduled in the first half of 2010 but at one shift, she said, mainly due to a decision to postpone by Renault. The plant is slated to have an annual production capacity of 400,000 cars by 2015.

However, the joint venture between Nissan, Renault and Bajaj Auto to sell a $2,500 car from 2011, would go ahead as planned. The ULC (ultra low-cost) car will roll out of a plant in Chakan near Pune and will be exported to other parts of the world.

Bajaj will hold 50 per cent in this three-way alliance, with Renault and Nissan taking up 25 per cent each. The car has been touted as the challenger to the Tata Nano and will be offered in both petrol and diesel options.

As for the Chennai project, sources said Renault planned to manufacture the hatchback version of the Logan as well as the Megane in due course. Nissan had zeroed in on two sub-compacts codenamed W02A and WO2B.

The first setback to the project occurred when Mahindra & Mahindra, which was originally the largest stakeholder with 50 per cent, dropped out. Renault and Nissan then decided to team up in a 50:50 alliance by which time the project cost had been revised upwards by Rs 500 crore.

As part of the retail plan, Renault said it would market its cars from Chennai through the Mahindra-Renault channel which already caters to the Scorpio and Logan. Nissan has drawn up its own retail business model which does not include any Renault product. However, the ULC car with Bajaj Auto is part of an exclusive distribution network.

According to sources, Renault has not been too pleased with the performance of the Logan and is being more circumspect about its India product strategy. It is apparently of the view that the ULC project makes more sense at this point when the world wants smaller, fuel-efficient cars.

The French carmaker was also looking at a truck venture on the lines of its global partner, Nissan. Reports were doing the rounds that talks were on with Bajaj for this purpose but the latter has now decided to produce its own pickup at its plant in Waluj, Aurangabad. For the moment, sources say, Renault would possibly keep its commercial vehicle plans in cold storage.

Incidentally, Nissan’s truck project with Ashok Leyland has already been put off by six months, to mid-2011, due to delay in getting land for the project. Another Nissan spokeswoman said that crumbling truck sales also made the delay sensible. The venture, with an initial capacity of 100,000 units a year, had earmarked 80 per cent of output in the domestic market.