Franco-Japanese alliance of Renault and Nissan is getting aggressive on its expansion strategy in the country. It is looking at raising the production capacity at its Chennai factory twofold to 8,00,000 models by 2015-16.
Renault-Nissan is adopting an aggressive stance to face the competition. For this purpose, the partners plan to share a minimum of 20-22 models between them across various segments in the next 4-5 years. This move will assist them in tackling the competition posed by the market leaders Maruti Suzuki and Hyundai India. The target is to cut deep into all segments, including entry level cars, premium Sports Utility Vehicles (SUV) and sedans.
The partnering companies are hoping to save on design and production costs through cross badging while coming up with the new product line-up. An example being the cross badging of Nissan Sunny, Renault Duster and Nissan Evalia models in the next few years. This move is part of their attempt to reduce development costs and lead-time for the launch of these cars in the country.
Takayuki Ishida, Managing Director (MD), Nissan India, said, "We have increased the production capacity from 200,000 units per year to 400,000 from April, 2012. As demand increases in local and export markets, we keep exploring options of expanding the business."
The alliance has plans to set up plants in states like Gujarat, Maharashtra and Karnataka. However, the next factory, in all likelihood, will be established in Chennai only. Takayuki said, "It's too early to comment on any specific number on additional capacity creation or locations for new investment, if any."
Senior Director, Automotive, Frost and Sullivan, V. G. Ramakrishnan, said, "The plan looks too aggressive for someone who has just entered the Indian market. Taking on leaders like Maruti and Hyundai will be a tough task. On the production front, they have done a smart thing by sharing cost on manufacturing and development, but creating distinctive a brand image in the minds of the consumer will be the key towards achieving their goal."
In 2012, 3,00,000 cars will roll out from the alliance's stables, 70 per cent of which will be exported. The Franco-Japanese partnership is, however, focussing more upon the domestic sales and plans to bring down exports by 30-40 per cent. It wants to achieve the objective of 90-95 per cent localisation by the year 2013 and has already begun establishing an infrastructure to make this possible. In contrast to other parts of the world, the alliance has established a joint Research and Development (R&D) facility in Chennai, which employs more than 2,000 engineers and technicians. This workforce oversees various projects run by both the companies for domestic as well as international circuits.
Renault-Nissan is establishing a component validation centre in a bid to shape up its R&D. It has already asked more than 100 vendors to set up facilities in Chennai. 60 per cent of the total supplier base of 225 firms is already based in Chennai or in its vicinity, while 25 more vendors may relocate here in the near future.
In FY2011-12, Nissan witnessed a 200 per cent YoY growth, with sales volumes of 33,275 units. On the contrary, Renault India's Fluence and Koleos sold only a few thousand units since it ventured into the country for the second time. India is a key market in Nissan's Power 88 plan, which aims to attain 8 per cent market share worldwide and 8 per cent profit rate by the year 2016. A network of 450 suppliers is also on its agenda.
