Renault revs up for low-cost car with Bajaj, says MoU soon

A proposed plan to make a low-cost small car with an Indian partner would be very important for Renault and Nissan Motor...

A proposed plan to make a low-cost small car with an Indian partner would be very important for Renault and Nissan Motor Co as the foreign firms seek to tap growth in emerging markets to help offset saturation in the main US and Japanese markets, a senior Renault official said.

The Renault-Nissan combine is studying the feasibility of making a $3,000 car with Indian motorcycle maker Bajaj Auto, following the lead of Tata Motors, which last month unveiled the Nano, a car priced at just over $2,500, or about half the price of the cheapest car in the market now.

“It is very important for us,” Patrick Pelata, executive vice president of Renault, said after the signing of a memorandum of understanding (MoU) late on Friday for a $1-billion plant to make 4,00,000 vehicles and powertrains in southern India.

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“What Tata has done with the Nano is very important, and a big step in the automotive industry, allowing people with motorbikes in markets like India, China, Brazil, Indonesia to find something less expensive than current options,” he said, adding he expected a deal may be signed “within the next two months”.

Carlos Ghosn, chief executive of Renault and Nissan, had said a deal with Bajaj may come this year and that they aimed to produce cars by the end of 2010 or the beginning of 2011.

Small cars in India make up more than two-thirds of sales of passenger vehicles, which are expected to nearly double to 2 million units by 2010. Carmakers including Toyota Motor and Fiat have also expressed interest in a low-cost small car to target rapidly rising middle-class incomes in emerging markets.

Renault, Nissan and Bajaj were committed to signing a deal soon, reiterated Pelata, and were working towards a car that would be “a good challenger, not just a me-too product” to Nano.

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Bajaj, India’s No 2 motorbike maker and the top three-wheeler maker, has no experience with cars, but Renault has “a long experience with low-cost cars,” he said, referring to the no-frills Logan sedan, which has been a big hit in emerging markets as well as some developed markets, where the high cost of oil has helped drive demand.

Renault has a JV with Mahindra & Mahindra for the Logan in India, where it was launched last year. Mahindra, which had originally signed on as a partner with Renault and Nissan for the Chennai plant, later withdrew.

The Chennai facility will be a “sister plant” to a Renault-Nissan plant in Tangiers, Morocco, for which an alliance was recently signed, Pelata said.