Carlos Ghosn’s dream project, the ultra-low-cost (ULC) car, is finally on track, but with significant changes.
While announcing an understanding he has reached with Rajiv Bajaj last evening, Ghosn made it clear that there is neither any formal agreement nor any joint venture structure in place just yet. But the broad functions of the alliance partners have been decided.
So design, engineering, manufacturing and sourcing for this car would be done entirely by Bajaj Auto, whilebadging, branding, marketing and sales would be the responsibility of the Renault-Nissan alliance in India and overseas markets.
Ghosn made it clear that the product, which is expected to be “lowest cost among all new products being developed in the Indian market”, will not carry the Bajaj name on it.
This car would be developed and produced entirely by the Bajaj team but will be branded by the Renault-Nissan alliance!
It is pertinent to remember here that the ULC project has been facing delays over differences between the alliance partners over design, costing, fuel efficiency and also over branding issues. So from Ghosn’s statement, it appears that Bajaj has given up his earlier insistence on sharing the brand name.
Bajaj did not respond to queries on the matter.
Then, this car is expected to share a whole host of suppliers, parts, technology and perhaps even the platform with Bajaj’s three-wheelers. The car would draw on “frugal engineering” synergies which Bajaj can bring to the project. Ghosn said this car would aim to be the lowest cost four-wheeler in India but pricing would be a matter of a host of factors at the time of launch.
So, will the unnamed ULC car of this three-way alliance become among the first homegrown competitors to the Tata Nano?
Not only is the Nano the cheapest cars anywhere in the world, it also offers the most fuel efficiency among all passenger cars present in India.
Ghosn said that the ULC vehicle would offer the most superior fuel efficiency as well as ownership cost. But he declined to specify either the investment required for the project or the number of units of this model that will be manufactured from 2012 onwards.
The ULC car would become the flagship product of the Renault-Nissan alliance across many markets in the world since it would be largely exported to emerging markets such as Africa, some countries in Asia and South America from India.
How important is the ULC car project for Bajaj Auto?
The second-largest Indian two-wheeler maker has seen a dramatic rise and fall in fortunes in domestic as well as international markets over the last several months. Bajaj has already initiated a low-cost bike project with the help of Chinese suppliers and the first such bike is already ready for sale in markets such as Brazil.
On the three-wheeler front, Bajaj commands a large chunk of the domestic market. But the overall market itself is not growing as expected. No wonder then that the ULC project could become a crucial investment by Bajaj to straddle the four wheeler space, where it has no presence as of now.
Already, its dream of partnering the Renault-Nissan alliance in developing a low-cost LCV has crashed, with Ghosn making a categoric statement that the alliance will bring out a low cost LCV only under the JV with Ashok Leyland (ALL) in India.
The ULC project holds immense significance for the Renault-Nissan alliance as well. Not only will it become the entry level product for the alliance in India and perhaps several other emerging markets, this car would also help it maintain its financial health in crucial markets.
But Ghosn does not appear to be banking upon only Bajaj to make a dent in the Indian automobile market. His other alliances - with Mahindra & Mahindra for the Logan and with ALL for LCVs - are also positioned in a way to give it more than a toehold in the 11-million-unit Indian vehicle market.
India is poised to grow to a 6 million annual car market in the next decade and the Renault-Nissan alliance is already coming up with a 2 lakh unit car manufacturing facility in Chennai. Nissan small car Micra/March and several other vehicles on this platform will roll out from Chennai next year.
It remains to be seen whether the proposed alliance with Bajaj stands the test of time and cranks out a “super affordable” car which is relevant to not just India but other emerging markets as well.
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