CHENNAI: For the first time ever in India, multi-brand vehicles from different automobile companies will roll out from a single facility. In a unique exercise, Mahindra & Mahindra of India has joined hands with Renault SA of France and Nissan Motor Company of Japan to form a three-way joint venture to set up an automobile manufacturing facility at Oragadam on the outskirts of Chennai.

The joint venture will facilitate Mahindra and its partners Renault and Nissan to make medium and small passenger cars and small utility vehicles on a 925-acre land. The three had committed to invest a minimum of Rs. 4,000 crore during the next seven years. Mahindra will hold 50 per cent of the equity in the venture. Renault and Nissan will hold the balance.

The first vehicle from the facility is expected to roll out in the second half of 2009. The unit will have a capacity to make four lakh vehicles in the first phase, which will go up to eight lakh vehicles subsequently. The production facility is expected to provide direct employment to 5,000 people. The facility will also make power train for Renault and Nissan.

Four-member board

Addressing a press conference here on Monday, Pawan Goenka, President (Automotive Sector), Mahindra and Mahindra, said the joint venture would have a four-member board. While M&M would have two nominees on the board, Renault and Nissan would have one each. The Chairman and Chief Financial Officer would be from M&M, he added.

Keshub Mahindra, Chairman of M&M, told presspersons that Mr. Goenka would be the Chairman of the new joint venture. Mr. Mahindra said, "The tripartite agreement has proved that the world has changed and the time has come for India to take advantage of the global market. This agreement will create a healthy competition in selling different products from the same campus and it has also become a global practice."

On the acquisition of land for the project, Mr. Mahindra said the joint venture would relocate all those who would be displaced. The joint venture would even train those displayed for possible deployment in the project, he added.

He recalled how the wheel had come full circle. In this context, he said 50 years ago M&M had signed an agreement with Renault to make small cars and sell them at Rs. 7,000 a unit. It could not fructify for various reasons, he said.

Mr. Goenka said this was perhaps first time in the world that three automobile makers were coming together to produce vehicles for each one of them separately from the same plant.

Shared facility

Asked about the marketing implications for the joint venture, he clarified that all three were sharing only the production facility. Nissan would hawk its cars on its own through its dealership network. Renault, he said, had already floated a joint venture company with M&M to produce Logan cars from its Nashik plant. And, Renault would sell the cars made from the Tamil Nadu facility through its existing joint venture.

M&M would use its own network to sell its brand of products turned out from the three-way joint venture plant, he added. Mr. Goenka said all the three companies would use the local component-manufacturing vendors initially.

Each one's expertise

Mr. Goenka said the partners would optimise production costs through economies of scale following joint investment in plant and infrastructure, as also purchasing synergies. He said Renault would contribute to the joint venture its expertise in engineering, manufacturing and adaptation to meet customer requirements. Mahindra would bring to the table its in-depth understanding of the Indian market. Nissan, he said, would contribute in the form of worldwide export opportunities and manufacturing technologies.

The Executive Vice-President of Renault, Patrick Pelata, said the greenfield plant would be `a launch pad' for his company's operations in the country. Carlos Tavares, Executive Vice-President, Nissan, said his company would manufacture `compact cars' from the facility.

Sakthikanta Das, Industries Secretary, Tamil Nadu Government, said the government already had some land and would acquire more to meet the needs of the facility, which would come up on a 925-acre-plot of land. The new facility would provide direct employment to 5,000 people and indirect employment to many more.

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