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VW\'s deal not to affect Nissan-Suzuki drive

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Nissan will continue to source the Pixo, a small car from Maruti Suzuki, until the contract expires in 2012, thus laying to rest any speculation that the Japanese company was reconsidering the deal following Volkswagen’s purchase of a stake in Suzuki.

Nissan currently does not have a small car in its line-up for the European market, which is fast moving towards compact and fuel-efficient hatchbacks. It currently sources the A-Star model from Maruti Suzuki and sells this as the Nissan Pixo in Europe.

German car maker Volkswagen bought a stake of nearly 20 per cent in Suzuki for $2.5 billion in December last year, in an attempt to strengthen its plans for the compact car segment in burgeoning automotive markets such as India and China.

Experts stated that since the Pixo competed with Volkswagen’s Lupo (a compact car) in the European market, the Japanese company would have to reconsider the sourcing agreement with Suzuki.

Recently, Nissan’s Executive Vice-President Colin Dodge stated: “We do not know yet whether that strategy is still good, with Suzuki joining Volkswagen. A lot of people believe not, and we are thinking about it.”

No replacement for Pixo
But, according to Maruti Suzuki Chairman R C Bhargava, Nissan will have to continue the sourcing agreement as the Japanese company still does not have a replacement model for the Pixo, which is doing quite well in Europe.

“Nissan will be left without a small car if they terminate the agreement. We have had no formal dialogue with the company so far on the issue and our understanding is that the deal will continue for the entire duration, which extends till 2012,” stated Bhargava.

“Even if in future VW was to source a small car from us, it would not be similar to the A-Star,” he added.

Replying to a questionnaire, Nissan stated: “Nissan has confirmed that both companies will continue to comply with the OEM (original equipment manufacturer) agreement.”

A successful model
Nissan’s manufacturing agreement with Suzuki, signed in 2006, has given it a ready car that is an all-new compact car developed by Suzuki from scratch. The A-Star, in the news recently for being recalled by Maruti for rectifying a fuel leakage problem, has been very successful in the overseas market. This prompted Nissan to nearly double its sourcing target to 54,000 units this financial year, up from the 30,000 units planned earlier.

With VW planning an aggressive foray into the small car market over the next few years with expansive aid from Suzuki, the future prospects of Nissan’s deal with Suzuki look bleak, as VW may not want to share its small car details, which will entail huge investments with a third company.

Nissan will start selling its all-new compact car in the international and in the Indian market from this year. This four-door, compact hatchback will be made at its Chennai facility and will be launched by May. The car will also be exported to Europe.