Renault and Nissan to Challenge Tata in India
By Ian Grasso
Things are getting really interesting in the $2500 dollar car market. Tata made worldwide news with the Nano, and is introducing it in the midst of millions of Indians leaving poverty. Renault and Nissan want a piece of what could be the single largest socio-economic migration in the history of the world, and to do it are teaming up with a relative unknown Indian partner.
That partner is Bajaj Auto Limited, a company few have heard of outside of the subcontinent. The company has actually been around since 1948, but until now their business has been focused on mass-market motorcycle and scooter sales.
While we can only speculate on the internals of the Nano’s coming competitor, it would seem that Renault and Nissan have some advantages over Tata. It has a 50% stake in what is basically a motorcycle company in Bajaj, but it has a great deal of international auto-making experience and a ready pool of suppliers in the region that Tata brought in to make its small car. In a way, the extensive cost cutting measures that Tata and its chief executive, Ravi Kant, forced out of suppliers is an advantage for Nissan-Renault. They use the same suppliers to build a cheap competitive car, slap an Indian name (Bajaj) on the car at home, and then use their international pull to export the car all over southeast Asia and the world with a Nissan or Renault nameplate.
On the other hand, Tata is the only one with a car right now, and will be in the proverbial driver’s seat by the time Bajaj gets a car out the door in 2011. They can sell volume units right now and gradually improve the Nano product line while they work out the kinks. Bajaj and Renault/Nissan will come to market with a brand new car that will have to offer more quality (and perhaps luxury) than the Nano did on its introduction – cutting into either profitability and/or sales.
And what about Suzuki who, along with its partner Maruti, is the largest automaker in India? Their current low cost offering, the Alto city car, is nearly twice as expensive as the Nano, and will presumably be pricier than the new Renault-Nissan-Bajaj car when it is introduced. The company just reported that its fourth quarter earnings were down by 34 percent and their stock price is suffering on the Indian markets. It seems as though they are being outflanked by both the domestic and international competition.
India is, along with China, the most interesting large car market. Things will only get more stimulating with the confluence of international and domestic competition and skyrocketing energy costs.
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