Renault-M&M alliance on last legs?

In the clearest hint yet that all is not well with its alliance with Mahindra & Mahindra, Carlos Ghosn, chief of French auto major Renault SA, on Wednesday said if things did not work out, it can sever ties and may even drive in its new product in India with a different partner.

Their joint venture, called Mahindra Renault Pvt Ltd, sells the entry-level sedan Logan. The alliance has been a subject of speculation with declining sales of the car only adding another question mark.

Renault has a 49% stake in the venture. The French giant  also has an alliance with Bajaj Auto for a small car project and with Ashok Leyland through sister concern Nissan for light commercial vehicles.

"I am not saying we will, I am saying we can. I don't want anybody to be surprised. We have today three partners. Our intention is to continue with the three, but if it is not possible, we need at least one," Renault president and CEO Carlos Ghosn said at the Tokyo Motor Show on Wednesday, responding to a query on whether Renault was unhappy with its Indian partners, particularly with M&M, following the dismal performance of Logan in India.

"It is a matter of concern every time your sales go down on any model not only in India, we always check why... We are going to try for sometime, if it does not work we will go for second time with a decent car and eventually with a different partner...," he said.

Ghosn said Renault is on a learning curve through its partnerships and in the long run it is going to stay put with at least one of the three partners.

"What I can tell you is that we are certainly going to stay with at least one of them. We may on the long run sever relationship with one of them. I can't tell you what's going to happen but we need at least one partner in India," he said.

But a Renault India spokesperson was quick to douse the fire, clarifying in a statement that Renault would like to state that at this stage there is no decision, nor any plan to cease coordination with any of its current partners.

"As stated on earlier occasions, we are in advanced stages of discussions with our partners to look for a way forward for our projects in India," said the official spokesperson.

"In his (Carlos Ghosn) replies to questions from some members of the Indian media, Ghosn's comments were related to the Renault-Nissan Alliance operations in India. Hence, it should not be construed to be referring only to Renault India operations. Ghosn stressed the importance of working with local partners in India, in order to benefit from their knowledge and capabilities."

Renault is learning from its current experiences in India and "we are going to come with a second wave of products", he said without specifying details.

Pawan Goenka, president (automotive), M&M, added, "We have no clue about what Ghosn has said in Tokyo and in what context. From our side nothing has changed and we are in talks with Renault for future products and how to improve upon the sales of Logan."
Logan has failed to live up to expectations and sales have been on a down slide. In September only 510 units of the car were sold compared with 1,752 units in the same month last year.

In the first six months of this fiscal, the venture sold 2,901 units of Logan compared with 9,217 units in the same period last year.

Ghosn said the failure of Logan was because "it is more expensive than we hoped it would be in India. The Indian market is extremely sensitive to the price. Another reason is we don't have enough localisation in India."

It is speculated Renault will drive in its sedan Sandero to India in the near future.