Mahindra-Renault may up Logan capacity in India

Renault and joint venture partner Mahindra & Mahindra Ltd. will raise the capacity to produce Logan cars in India and improve local content to cut costs, senior officials said on Tuesday.The no-frills Logan sedan, which marks the French car maker’s foray in the fast-growing Indian market, is being produced at a Mahindra plant in Nashik in Maharashtra with an initial capacity of 50,000 units a year. This can be ramped up quickly if there is more demand.

“We can make 50,000 units on a double shift, so we can add a third shift and increase output by 20,000-25,000 units quite easily,” Pawan Goenka, president of Mahindra’s automotive sector, said after the launch of the Logan in Mumbai. The Nashik plant has a capacity for 150,000 units a year, which is evenly divided between the Mahindra Scorpio, the Logan and the Mahindra Ingenio, scheduled for launch in 2008.

The Logan, priced at 430,000 rupees to 640,000 rupees ($9,977-$14,850) for 1.4-litre and 1.6-litre petrol and 1.5-litre diesel variants, will be rolled out nationwide by November. “This launch marks a new step in our global development programme,” said Renault Chief Executive Carlos Ghosn. “India is one of the fastest-growing markets in the world and offers significant potential for profit growth,” he said. The Logan will compete with models from Ford Motor Co., Tata Motors and Suzuki Motor Corp.’s Maruti Udyog Ltd., the leader with nearly half the market. Mahindra, Renault and Nissan Motor Co. have a separate venture to spend $905 million in a greenfield project outside Chennai to make 400,000 cars in seven years’ time.

About 50 percent of the Logan is made from locally sourced components, and the two firms will increase the degree of localisation to cut production costs and compete better. “We would like (localisation) to go to beyond 90 percent,” said Patrick Pelata, Renault’s executive vice president. “That will happen when we are also able to get engines locally, once the Chennai plant comes up.”

Engines are currently being imported from Romania and Spain. Parts in India are 10 percent cheaper than in Romania, where the Logan is already being built at the Dacia subsidiary, and Renault has “fairly significant” internal targets for parts exports, he said. Renault may export Logan cars from India if demand is less than 50,000 units a year, Pelata said. Intended for emerging markets such as China, India and Russia, the Logan concept has become a hit even in mature European markets and inspired other automakers such as Volkswagen, Fiat and Toyota Motor Co.

India’s low-cost manufacturing advantage will give Mahindra-Renault an edge, despite its late entry, Goenka said. “The combination of a sense of frugality and low-cost of innovation is the reason why every major manufacturer in the world wants to be in India,” he said. General Motors Corp. is gearing up for the launch of its small car, the Chevrolet Spark, in the next couple of weeks, as it adds the Indian market to a global autos battlefield between U.S., European and entrenched Asian rivals. Analysts estimate the Spark, modelled along the lines of the defunct Daewoo Matiz, will have a sticker price of around $8,000.

Small cars make up more than two-thirds of the Indian market, where annual sales of passenger vehicles are expected to nearly double to 2 million units by 2010. The next model of the Logan will be launched in Brazil towards the end of 2007, before a European launch in 2008.

Source : Reuters

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