Bajaj Also Looking at Producing Cheap Car in India

By Brendan Moore

02.01.2008

Tata has gotten all the press so far with the Nano, but as we’ve mentioned before, there is another Indian company that is considering making a cheap car to compete against Tata in the same market segment. That company is Bajaj Auto, an Indian firm that has experienced great market success in India by making motorcycles and three-wheeled vehicles. It is thinking about entering the four-wheeled automobile market by producing a bare-bones car much like the Nano.

There is a potential partner named Nissan-Renault that is extremely interested in Bajaj Auto’s decision. Nissan-Renault would like to avail themselves of the engineering skills and local market expertise of Bajaj regarding the manufacture of such a car. Ideally, Nissan-Renault would also like a light pickup out of the deal as well.

Bajaj has been circumspect about its plans so far, but it did tell The Economic Times of India today that it has ample cash reserves to fund such a project. Rajiv Bajaj, Managing Director of Bajaj, said, “Our reserves have been quite large and in the past that was one of the criticisms against us. Some of that money has to be brought to bear on our expansion.” He added that, we “have to be smart about investing in these expansion projects”. With its capacity ready for the current two and three-wheeler business, the “big-ticket item of expenditure is the four-wheeler venture,” Mr Bajaj said. “And that’s where we are doing things differently. We are going with the approach of a motorcycle maker which cuts down development costs and manufacturing expenses,” he stated.

Mr. Bajaj commented that the company has put aside approximately $250 million USD for development of a small car, but if Bajaj Auto brings in a partner, the expenditure may not be even half of that amount. Further, whatever amount it ends up being, it will be spread out across a 36-month period.

From Nissan-Renault’s perspective, if they can put in $125 million total and get a global inexpensive small car platform out of it, they would have to consider that a tremendous bargain. That is not a lot of money for a company the size of Nissan-Renault and they have to be salivating at the prospect of having a car to slot under the wildly successful Logan; a car they can sell in every developing market in the world.

O course, it’s worth pointing out that Bajaj may lose any competitive advantage it thinks it may have by dithering. Tata already has their car out, GM has recently hinted that they could have a cheap car available very quickly if need be through their partnership with Wuling in China and there are some other Chinese manufacturers that might have the ability to compete in the ultra-cheap segment. If Bajaj is saying their potential product is at least three years away, that may be too late.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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4 Comments

  1. I’m really surprised Toyota hasn’t jumped into this segment yet. It would seem to be right up the alley of Toyota and a micro-car partner.

  2. There are a lot of companies in China that make really cheap cars, but most of them have no conection to a larger company. Also, the quality is incredibly awful.

  3. The Chery QQ is only $5000 fully loaded and that is a lot more car than the Nano. Not twice as much car than the Nano, more like 3 times as much.

  4. How much can it cost to make the Nano crash-compliant in the EU and/or the U.S.? Let’s say its $5000, a 166% more than the car itself. Its still makes the now-crash-compliant car only $8000, which is only around 5800 euros, which is still incredibly cheap. Why wouldn’t they sell this in Europe?

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