Bajaj's 1 Lakh Car: Does Tata Lakh Competition?

♠ Posted by Emmanuel in , at 5/14/2008 01:44:00 AM
Bad puns aside, the importance of a car at the Rs100,000 or 1 lakh price point (a shade less than $2,500) cannot be understated as it appears to be a definite sweet spot for automakers wishing to gain a foothold in the emerging Indian middle class market for cars. Earlier this year, the Tata Group, makers of virtually every sort of product and service on the face of the Earth, unveiled its 1 lakh car to great fanfare, the Tato Nano. Hot on the heels of that vehicle's introduction, we have the legendary Indian scooter maker Bajaj also coming out with its own plans for a one lakh automotive contraption. What makes this particular 1 lakh car particularly interesting to me is the involvement of Carlos Ghosn / Renault / Nissan in its design and manufacture. While Ghosn may have lost some of his reputation with the diminished performance of Renault's Nissan partnership, he remains today's foremost auto magnate by a good measure.

What is interesting is that Renault already has a partnership with the Indian firm Mahindra in producing a local version of its Dacia Logan design. Better yet, call it "partnership diversification" with a range of products with different partners at different price points as noted in a previous post. From the Times of India:

Here's a competitor for Tata Motor's small car Nano. Renault-Nissan head Carlos Ghosn and Bajaj's Rajiv Bajaj unfolded their joint venture plan on Monday, announcing a low-cost car at $2,500 (Rs 1 lakh) to be manufactured in India. The car is expected to hit the road early 2011, a little more than two years after Nano, which is scheduled to roll out in September-October.

Sources said the Bajaj-Renault-Nissan car would come in both petrol and diesel options. "Initially, it would come with a petrol version and diesel would follow," they said. However, apart from revealing the price tag, the two companies refused to give details regarding investments, engine capacity, and fuel efficiency. Sources added that a three-way MoU (memorandum of understanding) could be signed by June with the companies now busy on finalising the technical and legal nitty gritties of future engagement.

In a statement issued on behalf of Bajaj and Ghosn, the companies said they they would form a joint-venture to develop, produce and market the low-cost car code-named 'ULC' (most probably Ultra Low Cost). The new JV will be 50% owned by Bajaj Auto, 25% by Renault and 25% by Nissan (a group company of Renault).

While sceptics had initially doubted the viability and potential of a low-cost car segment priced below $3,000, Ratan Tata went ahead with his dream project, which saw others also drawing plans. Ghosn, who has already tasted success in emerging markets with his 'no-frills' Logan, feels that a new low-price compact not only has potential in a big market like India but can also be pitched well in other similar markets abroad.

Bajaj-Renault-Nissan would manufacture the proposed car at Chakan, in Maharashtra, where Bajaj already has a plant. "Initial planned capacity will be 400,000 units per year. Sales will start in early 2011 in India, as a primary market, with growth potential in other emerging markets around the world," the companies said.

Others players are also eyeing this ultra low-cost segment. South Korean auto major Hyundai, that has already made India a hub for manufacturing small cars like 'i10' and 'Santro', is also working on a low-cost car project to be positioned below Santro. General Motors is developing a car in the range of $3500-$4000 (Rs 1,40,000-Rs 1,60,000).

Analysts said the focus on the low-cost segment is set to yield rich dividends for the Indian automobile industry. Both engineering and manufacturing sectors would receive a boost as most of the car makers, including GM and Hyundai, have said India would be the base to develop and manufacture such a car.

"They understand frugal engineering, which is something we aren't as good at in Europe or Japan," Ghosn has been quoted, while praising Indian engineering and design skills. And, for Bajaj, this would be an ambitious foray into four-wheel segment.