Monday May 12, 06:50 PM
Renault-Nissan, India's Bajaj announce cheap car project
By Salil Panchal
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MUMBAI (AFP) - Renault (Paris: FR0000131906 - news) -Nissan and India's Bajaj group said Monday they planned to make a 2,500-dollar car by early 2011, the second effort to make a cheap car for the South Asian nation's rapidly growing middle class.
The budget car, which would cost 100,000 rupees in India, is so far only known as "Codename ULC." The joint venture would be 50 percent owned by Bajaj Auto, 25 percent by Renault and 25 percent by Nissan, a statement said.
The ULC will be produced at a factory to be built at Chakan, Maharashtra, in western India. It will eventually produce 400,000 units a year, the two groups said.
"(The small car) will offer twice the fuel economy than the existing products in the market," Bajaj Auto managing director Rajiv Bajaj had said earlier, with the firm aiming for 34 kilometres (21 miles) on a litre of fuel.
Renault-Nissan president Carlos Ghosn had announced the joint venture in early November (Frankfurt: A0S9N7 - news) 2007 after preliminary talks in July. The main market for the car will be India but it may eventually be sold elsewhere.
Bajaj is India's second-biggest motorcycle maker, and Religare Securities automobile analyst Piyush Parag said the proposed vehicle's low price could be a boon for the firm.
"Bajaj will have a price-point advantage, with few cheap alternatives available in the car segment," the expert said.
One of the few rivals could be Tata Motor's Nano, unveiled earlier this year and billed at the time as the world's cheapest car. Tata said the car could be ready for sale by September and plans to sell it for around 2,500 dollars.
Domestic and international automakers are racing to corner India's small-car market, which accounts for over two-thirds of domestic sales in the country of 1.1 billion people.
Manufacturers will remain committed to the small passenger segment despite rising raw material costs and the likelihood of slower economic growth in India.
"The incremental demand for small-cars is strong," says Piyush, whose firm forecasts 13-percent growth in the passenger car segment for the year to March 2009.
Other experts point out India could serve as an Asian export base for small cars.
"There has been a steady move by automobile makers to make India an export hub for the Asian region," says Bhavesh Shah, vice-president with brokerage Asit C. Mehta.
"Lower costs and technological advance are to India's advantage at this stage of development," he said.
Japan's Toyota Motor Corp (Frankfurt: 853510 - news) . and Honda Motor Corp., among other firms, have also said they are mulling manufacturing low-cost cars as India's population becomes more affluent and trades up from motorcycles.
Renault and Nissan are linked by cross shareholdings. The French carmaker is the biggest single shareholder in the Japanese company.
The Bajaj group is in the process of a demerger, with Bajaj Auto likely to be relisted on the stock market.
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