Bajaj may not form JV with Renault, Nissan

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Bajaj Auto, the country’s second-largest motorcycle maker, has said its low-cost car project with Renault and Nissan is on track, but may not form a joint venture (JV) to manufacture and market the car.

In 2008, the companies had planned a tripartite joint venture entity that would build and sell a $3,000 (about Rs 1.4 lakh) competitor to Tata Motors’ Nano, the world’s cheapest car. Bajaj was to have a 50 per cent stake, with Renault and Nissan having 25 per cent each.

“There is no need for a manufacturing or a marketing JV, because our responsibilities are distinct,” Rajiv Bajaj, managing director of Bajaj Auto, said in an interview yesterday in Pune. “We will just be an original equipment maker.”

However, he said a final decision had not been taken and the three partners would decide the future course of action. “A final decision will eventually be made jointly,” Bajaj said.

Bajaj has the sole responsibility of developing and manufacturing the car. Renault, France’s second-largest automaker, and Nissan, Japan’s fourth-largest automaker, have the responsibility of branding, marketing and sales in India and overseas.

Ravi Kumar, vice-president, business development, Bajaj Auto, said, “As such, we can fulfil our mutual objective through a simple original equipment manufacturer (OEM) arrangement, and without the need to necessarily create a new corporate entity in the form of a JV.”

The new structure may enable Bajaj to widen its product range beyond motorcycles and three-wheelers without incurring marketing costs as rising incomes encourage Indians to switch to four-wheeled vehicles.

The company plans to spend about Rs 500 crore ($107 million) on developing the car and on setting up a factory in Pune, according to Rajiv Bajaj. The vehicle would go on sale in 2012 as scheduled, he said.

“In the four-wheel space, we are very new,” Bajaj said. “When we are associated with Renault-Nissan, we can take advantage of their distribution at least in some markets.”

The project “is proceeding on track” based on the original agreement between Renault Chairman Carlos Ghosn and Rajiv Bajaj, that was announced in early November 2009, Ashish Sinharoy, a Mumbai-based spokesman for Renault’s India unit, said in an e-mail. “The new agreement clearly stated that Bajaj will build a vehicle and supply it to the Renault-Nissan alliance to market and distribute.”

Mitsuru Yonekawa, a spokesman at Nissan, said cooperation was moving ahead.

Bajaj might use the low-cost car’s platform to develop more products in future, Rajiv Bajaj said. The company is aiming to develop a car that will cost owners about Rs 5,000 a month in financing, fuel and other expenses, compared with about 3,000 rupees for a motorcycle.

Renault-Nissan and Bajaj announced the original venture plan in 2008. Ghosn in November said the small car might be priced at about $3,000.