The joint venture with Indian automotive giant M&M has not been the fairy tale story that the French auto maker Renault must have dreamt of. From the start, the launch of the sedan Logan was a non-starter. Now the auto maker has decided to go all alone and create a way of its own in the ever increasing car market of India.
Reports are rife about the proposed launch of Renault’s Fluence sedan sometime between the months of May-June. This will be followed by their SUV, the Koleos, expected to hit the market in the month of October. Renault is not a complete stranger in the Indian market but is among the last few major auto manufacturing companies to hit the Indian roads. With M&M, it sold the dud sedan Logan for four years, but the joint venture did not really took off, courtesy to the lackluster performance of Logan. For the period from July 2007 to April 2010, the sales figures were a meager 46,000 pieces, below par by any standards. Hence, in view of these developments, in the month of April 2010 Renault withdrew from the alliance, and in the deal gave the rights to produce Logan to M&M.
Executive Vice-president, Renault SA Mr. Jerome Stoll was quoted in a report as saying, the styling of the Logan was a spoiler albeit the car had good on-road credentials. Another sullying factor that berated the image of the car was the bulk buying of the vehicle by radio cab operators for commercial purposes. In recent developments it was reported that the company s chalking out a detailed marketing strategy for the Indian markets led by Marc Nassif. Law and Kenneth, has been hired by Renault for its advertising campaign. The French which have always been associated with sophistication is the value that the advertising campaign will emphasize on.
The merits of the French technology will be communicated across heavily. Renault which is in the process of developing an electric car is likely to launch it in India as well because that will give it a never-before seen credibility, and will help it demonstrate the technological superiority in the Indian market place, where the concerns for the environment are sharply on the rise. For it brand development exercise, Renault has followed the approach of top-down. The mind space will be gained by the expensive car offerings, which by virtue of the evolutionary process will enable it to enter the mass category next.
Hence the key to success lies with the car which Renault plans to launch. The Koleos and Fluence shall be imported from France in the form of knocked-down kits and will subsequently be assembled at the Chennai plant of Renault-Nissan. As is the norms with most European cars, they are stripped of their most luxurious feature to suit the Indian market condition, this will not be the case with Renault. The French auto major intents to keep the entire features of the car intact, just like those in the European markets.
Thus, the Fluence will continue to have a navigation system while the Koleos will sport the audio system from Bose. Certain features may be curtailed such as the six-airbags. Over the span of 2 years, Renault has planned three more launches. A hatchback is the next in line to be launched. Since Indian car market is all about small cars suitable for nucleus families, the technical centre of Renault-Nissan at Chennai is developing an indigenous car with local components to the tune of 85 percent. The grapevine has it that the car offering will be in the small car segment but a bit pricier than the earlier announced small car by Bajaj Auto’s joint venture with the company. The future of the said joint-venture with Bajaj auto is not yet clear.
Mr. Stoll noted that opportunity in all the segments are humongous and should not be missed at any cost. The market is moving in a hasty pace and Renault motors is surprised to witness competitors launch a car in a non-existent segment and succeed. He made a prophecy that the evolutionary process will alter the market structure in future than what is existent now. He elaborated on this by saying that the 20:80 ratios of big cars to small cars will continue to persist, but if we convert the 20% in terms of volume it would be a mammoth than what it currently is. On a question posed specific to the pricing strategy of company, Nassif and Stoll refused to divulge into details. But they expressly spelled their intent. The cost of the car would include initial cost, maintenance and service cost and fuel efficiency. Mr. Stoll further said such concern related to price will be addressed by closely monitoring the consumer behavior. He was of the view that what the company will ask for will be a good value for money proposition as the customer wants a good bargain rather than just cheap price. Taking a potshot at other competitors he said, that the products offered by Renault will be sold at the same price vis-à-vis competition albeit the length of the car will be longer by 10cm.
Capacity of the plant was the major constraint mentioned in the report. Originally Renault and Nissan has envisaged an investment of a total Rs 4,500 crores at their factory in Chennai with the plans to produce annually 4, 00,000 units. Now it was divulged that only one half of the said amount has been invested which was able to create a capacity of annual 2, 00,000 units. To further add to its woes, 55% of the capacity has already been allocated for the production of Nissan Micra with the purpose of exports as well as domestic markets. Even if the remaining capacity is fully taken by Renault, that will translate into lower market share due to lower volumes of production. Renault’s Indian arm is expecting an early green light for the remainder of the proposed investment. The original objective was to raise the production capacity by 2015 but it could be done before that. In the mean time, the company is already in the process to install 70 dealers across India by 2013. Mr. Stoll, according to the report, revealed that Renault is also interested in the Indian CV market. Renault being second in Europe, has a competitive and impressive line-up and it is mulling to find a profitable prospect for CVs in India. He signed off by saying that there is a possibility of launching commercial vehicles in India albeit they are not discussing the future prospect with any player in India.