Bajaj mulls manufacturing deal with Renault-Nissan for ULC

Bajaj Auto today said it may explore entering into a contract manufacturing deal, instead of a joint venture with Renault-Nissan alliance to produce the ultra-low-cost car (ULC), which is likely to hit the market by 2012.

"We can perhaps fulfill our mutual objective through a simple OEM arrangement, and without the need to necessarily create a new corporate entity in the form of a JV," Bajaj Auto (BAL) Managing Director Rajiv Bajaj told PTI.

Bajaj Auto had entered into a tripartite agreement with Renault and Nissan in 2008 to make small car with a price tag of $2,500.

He, however, said a final decision has not been taken yet and the three partners will together decide the future course of action. "A final decision will eventually be made jointly," Bajaj said.

Bajaj said as part of the understanding reached last year between the two-wheeler major and Renault-Nissan, BAL will be responsible for development and manufacture of the ULC, the Franco-Japanese alliance will handle marketing and sales.

However, as per a memorandum of understanding signed in May 2008, Bajaj was supposed to hold 50 per cent in a joint venture for developing the car, while Renault and Nissan would be owner of 25 per cent stake each.

Bajaj also rubbished reports of breaking up of the partnership. "It's untrue. I've explicitly said that the partnership is intact, and that the project is on schedule," he said.

The ULC was originally scheduled to be rolled out in India in 2011, but was delayed due to differences between the partners in terms of pricing and design. Earlier Renault wanted to price the car at around $2,500, but BAL insisted on lowering the overall cost of ownership.

The companies had announced that the ULC would be rolled out from an all-new plant to be constructed in Chakan, Maharashtra with an initial capacity of 4 lakh units per year.