M&M blames Renault for Logan-jam

The nub of the friction between Mahindra & Mahindra (M&M) and French carmaker Renault SA has finally tumbled out.

Guess what it is about? Mahindra wants engineering changes made in the Logan.
Renault’s answer? Non. The French giant wants the same product as available globally to be sold in India.

The standoff has been so  difficult, Anand Mahindra, vice-chairman and managing director of M&M, said “never again” will he go for a joint venture “where we don’t control changes in the product”.

“If you don’t control the product yourself in the local market and respond to regulatory changes, then you are going to have a problem,” Mahindra said in an interview with Bloomberg in Singapore on Thursday.

“There are discussions going on (between M&M and Renault) and everyone is aware of the problem. Renault has to be willing to provide local autonomy for creating changes in the vehicle. It’s a joint venture based on Renault products, not Mahindra products. So it’s in the hands of Renault how they will like to deal with the future,” Mahindra said.
A Renault spokesperson declined to comment.

Ergo, the future of the alliance may now hinge on whether new products can be developed on the Logan platform with specifications as desired by M&M to suit Indian conditions.

Take, for example, Logan’s length. The car is 4.2 metres long so attracts the highest excise duty of 20%. It needs to be less than 4 metres to benefit, for duty then is 8%.
Sources said M&M and Renault are discussing the development of an “under 4 m car” on the Logan platform for sale in India and some other markets.

Negotiations on this may well decide the future of the joint venture, sources said.
Analysts said Logan’s price-value equation compared with Swift Dzire, Tata Indigo and Ford Ikon sedans is quite weak.

A pricing between Rs4.2 lakh to Rs7 lakh, and irritants such as a wiper on the wrong side of a right-hand drive vehicle, apart from inadequate aesthetics and pizzazz are among the reasons cited by analysts for lower sales.

As for parting of ways, both have vehemently denied any such plans.

Back-of-the-envelope calculations show Renault alone has invested about Rs200 crore at the Nashik plant and has brought in close to Rs1,000 crore spread over the plant, a technical excellence centre in suburban Mumbai and the Chennai project. Walking away, thus, won’t come easy for the French carmaker. Ditto for M&M, which has also made investments at Nashik and would want to see some returns if it were to call it quits.
Logan sales fell to 401 units in October compared with 1,067 in the same month last year.