Renault-Nissan-Bajaj Cheap Car Goes Up in Price

And gets a different brand name as well…

By Brendan Moore

06.17.2008

While the $2500 (USD) Nano from Indian auto manufacturer Tata has gotten all the press, Renault-Nissan and motorcycle manufacturer Bajaj of India have been quietly working away on their own cheap and cheerful car for the masses in India. The intent was to match the pricing of the Nano whilst offering just a bit more standard equipment in order to have a competitive advantage in the market, but that strategy has been scrapped for the time-being as the triumvirate is saying privately that the car will be at least $3000 USD. Sources say the $500 increase is due to the ever-rising costs of steel and oil.

So whither the Nano? They are obviously facing the same raw materials cost pressures, and Tata acknowledged as much recently, but the company said that the launch of the car was so important to Tata that a decision had already been made to absorb the additional costs, thereby keeping the price of the Nano at the $2500 mark. Nissan says that they will watch consumer reaction to the Nano carefully when the car is launched this fall. Nissan is planning to launch their car, so far codenamed “ULC”, in 2011.

Not to put too fine a point on it, but 2011 is quite a ways off. Steel and oil could go up even more in the next three years. The $2500 car could become the $4000 car by 2011. In response to those types of comments, the manufacturing trio is circumspect. “It would be difficult to maintain the cost that we announced in 2008. The final price of the car would be decided only after it is manufactured and rolled out,” said a Nissan spokesperson.

As Ian Grasso pointed out in a previous article about the cheap car market in India, it is also worth noting that Tata is the only one with an actual cheap car out this year in India and will be in the proverbial driver’s seat by the time Renault-Nissan-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 years from now that will have to offer more quality (and perhaps luxury) than the Nano did on its introduction – further cutting into either profitability and/or sales. Of course, you can always play devil’s advocate and say that the trio of Renault-Nissan and Bajaj may actually have the advantage in this situation as they can “go to school” on Tata’s pioneer efforts in this segment, learn from that tutorial offered by Tata, and enter the market without making the same mistakes that Tata did.

It was announced earlier in the year through a press release that the production facility for the Renault-Nissan-Bajaj “affordable” car would be set up in Chakan in Maharashtra with a capacity of 400,000 units annually. Bajaj Auto holds 50% in the JV while Nissan and Renault hold 25% each. Small car sales are expected to reach approximately 2 million units per year by 2010, owing to the rapid growth of the Indian middle class.

Bajaj has already indicated that the small car will come in both diesel (CRDi type) as well as petrol versions, fitted with a “unique” two-cylinder engine. One must assume that the two-cylinder engine is probably part of Bajaj’s contribution to the overall effort.


Curiously enough, although the design is finalized, production sites chosen and prepared, and the car itself shown to the press in January, the three companies still have not signed a letter of understanding under which the vehicle will be produced. The companies say there’s no rush and that will be accomplished in due time before the end of 2008.

Lastly, although the car was shown to the press previously with Bajaj badges on it, the recently revised intention is to sell the car as a Nissan or a Renault when it hits the Indian market. Industry consultants say either brand would enjoy a considerable advantage over the Bajaj brand in terms of pitching a new car to the population.

COPYRIGHT Autosavant.net – All Rights Reserved

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. Has anyone ever considered that it’s NOT a good idea to introduce a car so cheap that virtually anyone could afford to buy it? Has anyone considered the oil supply-demand consequences that these cheap new cars will bring on?

    Or…

    In America, anyway, there’s a huge fleet of used cars that could be refurbished and sold abroad for the same, possibly less, cost than these new cars.

    Doing so would help with several issues:

    One, our trade balance would improve.

    Two, the ‘worse’ of these used cars probably don’t meet current emissions and safety standards, so our air and streets are safe from these beasts.

    Three, reducing the used-car supply will invariably increase the value of the remaining fleet –meaning the era of cheap transportation is over and those people at the economic margins will be forcibly diverted to mass transit. The last is admittedly very socialist in nature.

    Four, indirectly, it may stimulate NEW car sales as buyers decide that it’s worth it to pay a few dollars extra for that new car smell (and warranty) vs. a more expensive USED car.

  2. Anonymous, this situation then you mentionned actually happened, altough to a smaller scale in France when the Logan was introduced. The Logan hit the used-car market but also it cannibalized a bit the Twingo and Clio sales.

    I wish to see the Logan (known as Nissan Aprio in Mexico) here.

  3. anon. – I think the response from Indians regarding your statement would be, “you want less polution, then you should drive your cars less and let us have our very first car ever, which has a lot more meaning and importance to us than yours does to you”. Or something like that.

  4. Our planet is so totally screwed. We have to get rid of the internal combustion engine. Who’s up for a really fast electric car? (raising hand myself)

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