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Renault-Mahindra to set up car manufacturing unit in India
Japanese carmaker Nissan may also join the
Renault - Mahindra joint venture.
BY A CORRESPONDENT
Nov 10, 2006
Paris: France's Renault SA along with Mahindra & Mahindra would set up a car manufacturing facility in India.
The unit will assemble 500,000 cars a year, Renault chief executive Carlos Ghosn told a media conference.
Ghosn said Renault’s Japanese ally Nissan may also join the venture. Ghosn is also the head of Nissan, which is the second largest automaker in Japan. But Nissan’s decision on whether to join the Indian venture may take four months, he said.
Ghosn said the India manufacturing facility will be a vital player in its plans to spur its sales by 800,000 cars per year by 2009. Renault already has a joint venture with mahindra and Mahindra to build its low cost but highly popular Logan cars at nashik, Maharashtra. The M&M - Logan cars would be launched in 2007.
Renault, which sold 2.5 million cars in 2005, hopes to cash in on the demand surge in emerging markets like Brazil, India, China and Russia as demand in key west European markets slows.
Ghosn said the carmaker also aims to increase profit margins to 6% by 2009, from a projected figure of 2.5% for 2006.
For this to succeed, the Indian manufacturing unit is vital as production capacity in western Europe is being slashed due to sluggish demand.
However, Reanult plans to boost production in western Europe in the second half of next year (2007) with the launch of a new offensive.
Renault has not revealed the cost of the India project, but analysts do not see a $1 billion investment as was widely reported.
Industry observers said Renault is hoping for a higher return on investment than Nissan's plant in Ghangzhou in China.
The location of the India plant is also yet to be finalised, according to Renault’s Indian partner Mahindra and Mahindra’s managing director Anand Mahindra.
Mahindra said he is reportedly in talks with two Indian states to seek concessions for setting up the unit, which will manufacture the Logan car and its local versions to suit the domestic market.
Production in the proposed factory is expected to begin the middle of 2009.
Initially, the plant will manufacture 300,000 cars annually. The Mahindra-Renault venture hopes to catch the attention of suppliers also as spare parts in India are 35% cheaper than in countries like Japan and also Europe.
The passenger vehicle segment in India is projected to double to 2 million units in the next 4 years.
Suzuki Motor Corp, which owns Maruti Udyog Ltd., has about half of the market share in India.
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