No Challenge to World's Cheapest Car

July 15, 2011
Bajaj, Renault abandon plan to manufacture low-cost car.

Indian motorbike maker Bajaj has abandoned plans to develop an ultra-low-cost car with Renault and its partner Nissan, according to a senior executive.

The companies announced in 2009 that they hoped to bring a $2,500 minicar to market in 2012, but there have been suggestions for months that the project was stalling amid differences among the partners. Bajaj, India's second-largest motorcycle maker by sales, was to have designed and made the car, while Renault and Nissan would have provided the marketing and sales support.

The idea was to produce a vehicle to challenge the Indian-made Tata Nano, the world's cheapest car, but Bajaj concluded that the project was not viable and says that Renault has agreed.

"We don't intend to get into the low-margin (passenger car) business," said Rajiv Bajaj, managing director of Bajaj Auto. "We don't want to lose all our money," said Bajaj, whose company reported a 21% jump in quarterly net profit to 7.11 billion rupees (US$159.4 million) from a year earlier, slightly undershooting market forecasts.

A Renault spokesman said the company had no immediate comment on Bajaj's announcement. But in June, Renault India managing director Marc Nassif said that the French group and Nissan would only move ahead with the small car project if the quality of the product "matches our DNA."

If not, the group would "do something different," he added, underlining Renault had made no investment in the project.

The partnership between the two companies remains intact, Bajaj insisted. Bajaj will instead unveil a low-cost light commercial vehicle that could be used for carrying goods or people at the New Delhi auto show in January. "It will be a four-wheeler and we will be in the commercial space where we are strong," Bajaj said.

"Hopefully, they (Renault) will like what they see. They are at liberty to say we like it or turn up their nose," Bajaj said, according to the Business Line newspaper.

Bajaj will make the investments in the development and manufacture of the four-wheeler which would debut in Bangladesh and in Sri Lanka before being sold in other global markets, while Renault-Nissan would undertake the branding, marketing and sales of the four-wheeler, media reports said. Bajaj said it will cost a maximum of two billion rupees (US$$44.5 million) to make the commercial vehicle -- a tenth of the development cost for a car.

The French manufacturer, seeking to counter sliding European sales, has designated India, Brazil and Russia as its top three strategic markets for international expansion. The company last month launched a luxury sedan in the country called the Fluence and aims to sell four more models by the end of 2012.

Last year, Renault abandoned its previous attempt to crack the Indian market -- an unhappy tie-up with India's top sports utility vehicle maker Mahindra and Mahindra that resulted in the Logan, a dated-looking car that never took off.

Copyright Agence France-Presse, 2011

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