M&M, Renault to set up car plant in India

PARIS: Mahindra & Mahindra and French carmaker Renault agreed on Thursday to set up a car plant in India at a cost of just under $1 billion.

The new plant would manufacture Renault Logan’s derivatives as well as other vehicles. M&M is in talks with two states to set up the plant.

The first phase, with a capacity to produce three lakh cars annually, is likely to be ready by 2009. By 2012, the plant will be producing five lakh cars.

The plant’s focus would be the domestic markets, with limited exports.

Carlos Ghosn, Renault president and chief executive, said there is a high probability of Nissan joining the manufacturing joint venture. “Nissan is committed to set up a manufacturing facility in India and could join this alliance,” Ghosn said. “If it does, the capacity would go up further. A decision would be taken in four months.”

While Nissan’s original equipment deal with Suzuki to manufacture small cars will stand, the probability of having a manufacturing alliance with Suzuki has diminished, he said.

Not surprisingly, while M&M stock closed 6.5 per cent up at Rs831, Maruti Udyog, Suzuki’s Indian subsidiary, lost 3 per cent to close at Rs910.

“The second step has come before expected,” said M&M managing director Anand Mahindra. “It will expand the product range beyond Logan. We will gain economies of scale through efficiency in supply chain. Also, Mahindra would have access to the Renault-owned powertrain facility.”