M&M in JV with Renault for Logan

Mahindra & Mahindra today announced a ¤125 million joint venture with French auto major Renault, which will see the launch of a mid-size 'Logan' in India by the first half of 2007.

As per the agreement, M&M will have a 51 per cent share in the joint venture while Renault will have 49 per cent.

The joint venture, christened Mahindra Renault Ltd, will manufacture the Logan in one of M&M's three facilities (Nashik, Zaheerabad or Haridwar) at an estimated project cost of Rs 700 crore. The facility will have a capacity to manufacture 50,000 vehicles.

The factory will offer a stamping shop, a paint shop with top quality pre-treatment and an assembly line specific for Logan.

The car will carry 50 per cent localisation tag right from the beginning and will be marketed under the brand of Mahindra Renault.

Speaking on why M&M has opted to make its debut in the car market through a joint venture, Anand Mahindra, vice president, M&M, said: "It gives us scale economies, puts our excess capacity to good use, utilises our engineering skills and gives us badging and distribution benefits."

A right hand version of the Logan will be jointly developed by M&M and Renault and distributed through M&M's dealer network which might see some expansion in future. Renault will pay M&M contract fees for using its manufacturing facility.

M&M officials said that the car has undergone successful clinics in India and they have a fair indication of the proposed pricing but didn't want to discuss it for strategic reasons.

The Logan, which currently sells in Romania for Euro 6000, will drive into five new markets later this year.

The production of the car will begin in the first half of 2005 with a localisation of 50 per cent. The companies refused to share details on the planned variants quoting competitive reasons.

But sources in the industry have confirmed that there will be a diesel engine option probably a year later (2008). Besides selling it in the local market, Mahindra-Renault will also export the Logan from India to other right-hand-drive markets.

The export arrangement will not be restricted to the Logan. M&M will also export the Scorpio to countries where Renault has an established presence. Alan Durante, executive director of M&M, is meeting Renault executives in mid-March to discuss possibilities for Scorpio exports.

Both Anand Mahindra and Luc Manard of Renault clarified that the joint venture is for a single product and they will look at other possibilities only after they have established the Renault JV.