The yet-unnamed joint venture of Mahindra and Mahindra Ltd, its subsidiary Mahindra-Renault Pvt. Ltd, and Nissan Motor Co. that will make four lakh vehicles a year from 2009, will be a contract manufacturer with the three companies equally sharing the capacity, said Pawan Goenka, president (automotive), Mahindra and Mahindra. He added the company was in talks with Nissan to market its cars in India similar to the venture it has with Renault for the Logan sedan.
The joint venture company would not develop or sell cars on its own, said Goenka. The three companies, which would market the products made by the venture, will pay a fee to it in proportion to the goods manufactured.
“Mahindra’s greatest advantage is to get access to the technology of Nissan and Renault through this plant in Chennai,” said Umesh Karne, senior research analyst with Emkay Share and Stock Brokers Ltd. “The joint venture company will be developing cost-advantageous products. So, royalty (fee for manufacturing) would not be an issue.”
Global players such as Fiat SpA and Nissan Motor Co. are entering into contract manufacturing alliances with Indian companies to gain from the low cost of manufacturing in the country and benefit from economies of scale.
Nissan Motor Co. has a tie-up with Maruti Udyog Ltd, which sells one of every two cars sold in the country, to make 50,000 units a year of a small car, which it will export to Europe. Fiat SpA and Tata Motors Ltd are spending Rs4,000 crore to build a factory in Pune which will roll out models designed by the two companies.
Mahindra and Mahindra will hold a 50% equity in the contract manufacturing unit; the chairman and CEO will also be its appointees. Nissan and Renault will work out how to split the other half between themselves.
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