strained relations:
When Mahindra it is not interested in the Renault’s ambitious $3000 car project, Renault decided to look for others and found a partner called Bajaj. Incidentally, Nissan signed four MOU’s with Ashok Leyland. This led the alliance partners to move in different directions. When synergies are difficult to identify then what’s need to work jointly. Media reports indicated that Mahindra may pull out of tripartite JV for building a plant in chennai at an investment of over 4000 crores of rupees. In 2007, Mahindra, Renault and Nissan came together to build the plant in which Mahindra would hold 50% stake and remaining for Renault- Nissan.
There are two theories floating around, theory No .1 as logan sales failing to take off and as Renault – Nissan goes multi tie-up the relations between the alliance partners gets strained. Also, since Renault and Nissan believe that they would be able to sell more than what they initially planned to sell, the two companies had requested M&M to manufacture its utility vehicles elsewhere. Mahindra and Mahindra had initially planned to make tractors and utility vehicles at the proposed chennai plant.
Theory No. 2 tells this way, The idea of building an integrated plant with common facilities to manufacture a range of vehicles from the three different stables(Renault,Nissan and Mahindra) looked attractive initially, Mahindra apparently did not find sufficient synergies in the project once the detailing was done. The exercise showed that the products from the Renault and Nissan portfolio had more common parts and platforms, while Mahindra products did not have enough of an overlap. Instead, by focussing on driving up its capacity utilisation at its upcoming Chakan plant on the outskirts of Pune, Mahindra would end up deriving a saving of 20% on its cost of investment. If this theory is to be believed, Mahindra will continue with its JV with Renault to manufacture and market the Logan. The proposed joint project with Renault for a seven-seater passenger vehicle will continue.
But whatever the theory might be, Nissan-Renault combine’s move has put a spoke in M&M’s original plan to gradually shift the production of a number of its new vehicles (including Ingenio MUV) to Chennai.
Will Ford – Mahindra partner again?
In the mean time, whether Mahindra’s tie-up with Renault continues or not, Mahindra may find an another partner soon. In an earlier interview, M&M’s auto division president Pawan Goenka said the company is open to more partnerships, adding its existing partnership contract with Renault SA ‘is clear and well-defined. Both of us are free to hook up with other companies and do what makes sense for our business. The only defining clause is that neither can get into a segment that competes with the Logan. Incidentally, Ford CEO Alan Mulally said, the company is looking to take the partnership route in India to push-up the sales, telling international media that ‘teaming’ up in India is a ‘possibility’. Will this means a new marriage? we have to wait!
Ford had entered India in the 1990s through a joint venture with M&M, which rolled out the Escort sedan, but it subsequently bought M&M’s stake in the venture.