Trouble brewing for Bajaj’s ultra low-cost car project

It is not all merry in the bottom-of-pyramid serving camp, the next big phenomenon courtesy to the dwindling oil reserves across the world shooting the price of crude through the roof and the ever-growing lust of the automobile companies to make huge profit. In this gloomy apocalyptic scenario, the news by Bajaj to launch a Tata Nano-competitor was taken in great stride. But as it turned out, in the case of Nano the dream becoming a nightmare, similar fate is feared for this dream project of Bajaj PLC. It is expected to have a topsy turvy ride ahead in its quest to produce an ultra low-cost small car. The latest news doing the rounds in the market place is the pending decision of auto maker Renault, the partner in the joint venture, to give its nod for marketing and branding of the car in India. Executive Vice-President, Sales & Marketing at Renault Mr. Jerome Stoll was quoted as saying that the French automaker has still not seen the final product, pending the final touches to the car, it would be difficult for the company to ascertain whether it is a car to go ahead with its decision and whether to brand as well as market the car in India. This skepticism has creeped in the joint venture with the apprehension of Renault whether an ultra-cost small car could be considered a car by international standards. And the auto major is not willing to sacrifice its brand image, just for a small populist car. According to the agreement that was inked in the year 2008, it was agreed upon that Nissan and Renault will sell, brand and market the Bajaj car. It must be the noted that the launch has been postponed twice in a duration of 3 years. The said project has faced hurdles in the form of pricing, branding, marketing and distribution.

The officials at Bajaj PLC have reserved their comments on the latest developments. With managing director of Bajaj Auto, Mr. Rajiv Bajaj declining to comment on it by saying, ‘I have no comments at this stage’, this announcement, which is widely seen as a back-out, comes at a time when Renault itself is mulling a small-car for the domestic Indian market. At its technical centre in Chennai, Renault has a pool of 1500 people and has also established, in the economic hub of Mumbai, a design and engineering studio.

The mandate given to the technical team at these centre is to chalk out a car for the Indian market by understanding the consumer preference. The product is also planned to be launched in Russia and Brazil, after suitable customization.

The car that Renault is manufacturing for India will be positioned a tad above its vehicle with Bajaj. It is planned to be built in the company’s Chennai plant, with 85% of indigenous parts. By the year 2020, Indian automobile market is expected to have sold 6 million automobiles.

With its latest announcement, Renault has joined the class of auto makers like the Toyota, which had unveiled last month, the Etios, a sedan built exclusively for the domestic market. Toyota with its latest offering, the hatchback Toyota Liva, expects to increase it sales figure to 1, 40,000 cars in the year 2011.

The latest offering by Toyota is positioned to taken on the Maruti Suzuki Swift Dzire sedan.

Bajaj with its dream project has promised that the car would have a fuel economy of 30 kmpl and will be priced below Rs 2 lakhs. The joint venture is owned 50 percent by Bajaj PLC and the rest is equally divided between automakers Nissan and Renault.

End of 2012, is the newest deadline that has been set by Bajaj to launch the car commercially in the Indian markets. According to the MD of Bajaj, development of the vehicle is on track. Renault has chalked out a clear plan to introduce five new cars in the domestic Indian market over the period of 2 years. They include Koleos sports utility vehicle, Fluence sedan and a yet-to-be-specified premium hatchback. By the year 2014, the French automaker is mulling to corner 5 percent of market share in India.