The Hindu : Business : `Indian connection a must for low cost car manufacturing'

Online edition of India's National Newspaper
Thursday, Apr 05, 2007
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Business

`Indian connection a must for low cost car manufacturing'

Staff Correspondent

Logan production commences ahead of schedule

— PHOTO: AP

BOOSTING COMPETITION: President and Chief Executive Officer, Renault SA, Carlos Ghosn (right), visiting the Mahindra Renault plant at Nashik on Wednesday. — PHOTO: AP

NASHIK: It is difficult to be successful in low cost car manufacturing without having an association with India, Carlos Ghosn, CEO and President, Renault, said here on Wednesday. "There is something unique about the frugality in engineering and management here that we would like to learn from,'' he said.

Addressing the media after the formal launch of the Logan plant in the presence of the Vilasrao Deshmukh, Maharashtra Chief Minister, Mr. Ghosn said India was a key market for Renault both in the case of Renault Commitment 2009, which has set a target of eight lakh additional new cars sold worldwide by 2009, and beyond that date for further international growth, a significant share of which was expected to come from India

Saving in project cost

Mahindra Renault's Nashik facility has a capacity of 50,000 vehicles annually. "The Logan production has commenced a month ahead of schedule and at 15 per cent lower than projected costs,'' Mr. Ghosn, also President and CEO of Nissan, said.

Effectively, the company had saved Rs. 100 cror of its Rs. 700 crore planned investment. Further, he said "the Logan will make a positive contribution to our Group's operating profit but not at six per cent as we have. We need to sell one lakh plus cars to achieve good profitability with scale.''

Confident of the growth potential of the Indian market, Renault has taken a second step to increase its presence in the market and committed to the creation of a greenfield production site in Chennai by 2009-10 with partners Mahindra and Nissan, which will offer an initial installed capacity of four lakh vehicles annually, including engines. According to Mr. Ghosn, the company has still not decided on how to market the Nissan vehicles from the Chennai facility.

"We will probably have an Indian partner but separate from Mahindra-Renault so that there is no competition or cannibalization between brands. Nissan will mainly start with exports from the Chennai facility along with a couple of platforms and derivatives of the Logan which total four in number and some Mahindra vehicles.''

The Renault chief said there were many low cost manufacturing countries and India was not the only one. "Owing to `Frugal product planning' and `Frugal management' that is followed here and the competitiveness of vendor sourcing, the costs are 30 per cent lower than Western Europe and Japan. We would like to know the mindset behind say a Scorpio's production.''

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