Bajaj-Renault-Nissan takes up challenge of $2,500 car

The Nissan Micra: Nissan’s small car portfolio includes vehicles such as the Cube, Cubic, Micra, Moco, Otti and the Pino.

The joint announcement by Bajaj, Renault and Nissan about plans to develop and produce a new ultra low-cost passenger car finally puts to rest speculation about whether Mr Carlos Ghosn, President and CEO of the Renault-Nissan alliance, was being serious about taking up the challenge or whether he was just indulging in a bit of wishful thinking.

Mr Ghosn, who has steered the French-Japanese alliance companies to new levels of success in many global markets, is only acutely aware that the growth markets of the future for the automobile industry are all in the emerging economies of today. India, he has often said, will play a vital role in not just fuelling the demand for new automobiles, but also in developing them.

The fact that Renault-Nissan is the only global car manufacturer or alliance that has dared to quite literally take up the challenge of developing and manufacturing a $2,500 passenger car says a lot about Mr Ghosn’s unconventional approach to breaking new ground in the automotive industry worldwide.
Admiring the autorickshaw

But, what are the synergies that the three partners bring to the new joint venture company that they are planning to set up? Mr Ghosn has openly admired the frugal engineering abilities of Indian companies and one of the companies that he had chosen was of course Mahindra & Mahindra. But, he was also sold on the value proposition which the ubiquitous three-wheeled ‘autorickshaw’ that Bajaj Auto manufactures represents.

He has been quoted saying that the low-cost production model of the ‘autorickshaw’ can be replicated for making a passenger car too. What Bajaj will bring to the table is its low-cost product development, local sourcing and production techniques that have enabled it to aggressively price many of its two-wheelers yet turn in a tidy profit.
Testing & innovation

Renault and Nissan will bring in their testing and engineering skills, their unique innovations that will be suitable for an ultra low-cost car of the sort that is being planned and of course, their access to global emerging markets.

While Renault and Nissan both have small cars in their portfolio, the latter — Japanese alliance partner — is the one that would have the kind of vehicles which could form the inspiration or base on which the ULC (code-name of proposed low-cost car) could be developed. Nissan’s small car portfolio includes vehicles such as the Cube, Cubic, Micra, Moco, Otti and the Pino.

The planned $2,500 car cannot really borrow anything much from these relatively pricey small cars since the eventual price tag of the car is in such sharp focus. Also three of these cars — the Moco (Suzuki), Otti (Mitsubishi) and Pino (Suzuki) — are contract manufactured by other Japanese companies for Nissan. One of the reasons is the fact that Nissan does not currently have engines in the 660cc category.
Tata marker

Tata Motors will be the first to launch a car in this sub-A segment of the passenger car market and going by the fact that the Nano will sport a 623cc engine, with fuel-efficiency and low-cost maintenance as the primary focuses, the Bajaj-Renault-Nissan alliance will also have to look at a similar-sized powertrain. This would be possible only if a new engine is developed from scratch for the purpose or if it is sourced from another partner.

In an introductory note addressed to journalists from around the world who were attending the Nissan 360 in Portugal earlier this month, Mr Ghosn wrote, “Our industry is facing a significant period of change. Future growth will come from markets and segments that did not exist a few years ago.”

This statement will ring true if the new joint venture company can deliver its version of the people’s car by early 2011 without major cost escalations.