While Peugeot has decided to put ice on its India plans, Renault has forged ahead despite the unpleasant baggage of the Logan. Its secret weapon? A partnership with Nissan
The French are famously passionate about India. Film-maker Jean Renoir made The River as a loving—albeit exotified—homage to the country, employing then unknown Satyajit Ray as an assistant director. Louis Dumont was a famous anthropologist whose seminal work 'Homo Hierarchicus’ on the Indian caste system was highly influential in his field. You would imagine that considering this sort of lineage, French car makers would have burnt a lot of rubber in making sure they were leaders in this market. They haven't.
Truth is, they're barely here. Peugeot Citroen, Europe's second largest car maker, recently announced that it was setting up a Rs 4,000-crore plant in Sanand, Gujarat that planned on rolling out 170,000 cars including its high-end 508 sedans by 2014. This was part of its continuing efforts to generate 50 per cent of its revenues from outside Europe, and so far, it was doing quite alright with sales increasing seven per cent in China, 11 per cent in Latin America and 35 per cent in Russia. Yet, on February 15, 2012, Peugeot announced that it was scrapping its Sanand plans on account of worsening economic conditions in Europe. This is the second time Peugeot has stalled in India—the first was in 1993 when they left after a labour dispute with Indian partner Premier.
Renault—the other famous French car maker—also hasn't had much luck doing business here. Its joint venture with Mahindra and Mahindra, which was in charge of marketing and distribution, hoped to make a splash with the Logan sedan, but it ended up being a disaster. The Logan lacked styling but was sturdy , making it a favourite amongst cab drivers, something the French weren't too crazy about since they thought it diluted the car's brand value. What was shocking was the paltry number of vehicles sold by the Mahindra-controlled dealers—46,000 in four years. The joint venture (JV) is now part of the dust heap of automotive history and so is the Logan.
It is altogether commendable then, that unlike Peugeot, Renault has decided to take another stab at selling cars here. The company says that it wants to put 100,000 of them into the hands of Indian drivers by 2013 which is an aggressive target by any standards. "I see India climbing 20 spots to become the 11th largest country in sales contribution for Renault by 2016," says Marc Nassif, managing director, Renault India and sees the Logan debacle as a positive thing. "The learning curve has been steep and the results of it would be visible in the Fluence and all our future products," he adds.
The Fluence is Renault's high-end sedan and part of a range of vehicles being sold in India including a sports utility vehicle the Koleos and a hatchback called the Pulse. Two more products, the SUV Duster and another sedan will follow later this year. With five cars on road, Renault will cover half of the market, segment-wise, and 90 per cent of the country, geographically speaking, within just 15 months of its re-launch. Almost all of its cars have diesel options, which is unusually proactive for the French car maker since it probably knows that 80 per cent of all models sold in India where both petrol and diesel variants are offered, are diesel. Diesel cars make up 47 per cent of all cars sold in general.
Renault's efforts to woo India and Indians, even at this late a juncture when most of the world's significant car makers are here, makes more sense when you consider the European auto market is expected to contract by three to four per cent, with France itself slipping by seven to eight per cent.
The car maker has its work cut out for itself here. Renault has to play catch-up to fierce competitors like General Motors and Volkswagen, amongst others, who are already well entrenched. Still, it feels that it can set itself apart from them. "We want to enhance the overall ownership experience of Renault cars—right from the moment we sell the cars, to hassle-free maintenance services and easy availability of spares," says Nassif. "Each Renault dealership we set up will have one expert technician who has been trained for 43 days in France to help cater to customer needs better. Our performance will help us build brand awareness," he adds. Renault has 42 existing sales outlets and the company plans to expand to 100 dealerships by the end of 2012.
The lynchpin of Renault's India success is a unique agreement with Nissan inked in March 1999, where the two share resources and explore synergies in purchasing, engineering, production and distribution in order to enhance productivity. There are 38 design and production sites on all continents, including the one in Chennai. The group that possesses leadership in a given region promotes the development of the other partner by providing active support in sales, marketing and production. For instance, in Brazil, Renault also makes Nissan cars. In Chennai, the partnership is an equal one, but the plant is run by Nissan. The Rs 4,500-crore Chennai plant will make both the Nissan Micra as well as the Renault Pulse on the same platform, but with different styling.
The alliance is not only revolutionary but a financial godsend. The Group—which is the fourth largest auto alliance in the world—saved close to ^1.5 billion in 2011 from synergies between the two companies. "Renault has done the smart thing by entering into an alliance with Nissan. It is a long-term player and is likely to concentrate on building its branding firmly in the Indian market over the next few years", says V Ramakrishnan, senior director (automotive and transportation - South Asia and Middle East), Frost & Sullivan.
Nevertheless, the Indian market can be both exacting and peculiarly unique, especially for the French. Take legendary New York restaurant Le Cirque which opened up in India but tweaked its menu towards Italian dishes and flavours. Indian palates weren't very conversant with French ones, was the thinking.
The French will hope that it is a completely different experience with their cars.