Renault hopes to turn the corner with compact car

French car brand Renault will be unveiling an all-new compact car next month followed by its commercial launch in the second half of the year. This would be the second car launch by the company in a little over a month. It launched multi-purpose vehicle Lodgy earlier this month.

The compact car would be vital for the French company, which has been struggling in India, as it would bring down the entry point for the Renault badge to below Rs 4 lakh. The current entry point for the company in India is Pulse, which is priced at Rs 5.22 lakh (ex-showroom, Mumbai).

Of the six models Renault sells in India, urban sports utility vehicle Duster, which lost its crown to Mahindra's Scorpio as India's largest selling SUV, is Renault's top-selling product in India.

On the basis of the launch of the new compact car coupled with ramp-up in Lodgy volumes, Renault has set itself an optimistic target of nearly trebling its market share to 5 per cent by the end of 2016 from 1.75 per cent recorded in 2014-end. This would mean a three-fold jump in volumes to 150,000 units from under 45,000 units sold in 2014.

Sumit Sawhney, country chief executive and managing director, Renault India said, "To be in that segment, one needs a strong product, strong value pricing and strong localisation because the customer in that segment is very demanding".

The new compact car is important for the company also because it wants to reduce its dependence on the Duster even as the soft roader makes 90 per cent of the total volumes of the company. The Duster segment is slated to witness the maximum action this year and next, as competition including Hyundai, Maruti Suzuki, Tata Motors and Mahindra & Mahindra are gearing up to launch similar products.

Though Renault India executives are tight-lipped about the new compact car as it will be unveiled next month by the boss of Renault-Nissan alliance Carlos Ghosn, sources say it will be pitted against Maruti Suzuki's highest seller Alto. Based on an all-new platform called CMF-A, which is jointly developed by the alliance, the hatchback is expected to be powered by an 800cc, three-cylinder petrol engine.

"The under Rs 4 lakh segment is the biggest in the Indian passenger car market with 35-40 per cent of the volumes coming from there. We are looking to have a share of 10-12 per cent of this segment", added Sawhney.

Initial response to the Lodgy that was commercially launched a week ago, has been 'very good', according to Sawhney. Without sharing booking numbers, Sawhney said the idea is to position the Lodgy as a second or third car in the family to tap the 'high double digit growth' expected by utility vehicles.

According to the Society of Indian Automobile Manufacturers Association data, the utility vehicle segment costing up to Rs 15 lakh posted a growth of 11 per cent in the last financial year to 322,096 units as against 290,643 units sold in 2013-14. The growth comes on the back of under four per cent growth posted by the passenger vehicle industry during last year.

The alliance raised the capacity of the Chennai-based plant to 480,000 units a year last year to accommodate production of new launches. A further Rs 5,000 crore investment is expected to be committed by both the companies towards a brown-field expansion, according to officials in the Tamil Nadu government.

Though Renault is setting up new capacity, its existing utilisation level is under 45 per cent, according to SIAM data. About 60 per cent of that capacity is used in producing cars for markets outside India. But Renault will need that new capacity.

"We will look to be present in every segment of the industry. The CMF-A is a very flexible and robust platform", added Sawhney. The new small car has been built by Indian engineers who are among the 5,000 people working at the technical center based in Chennai. About 80 per cent of the work done at the technical center is done for overseas projects, according to Sawhney.

Renault says that one of the reasons why its sales look muted when compared to its peers is its limited reach. The company presently has 157 sales outlets and an equal number of service outlets. The aim is to reach 205 sales outlets this year and 280 next year. Similarly the service outlets count will also be increased to 205 this year and more than 300 next year.

Competition is ready to meet Renault head-on. As for Renault's new small car, Tata Motors would be launching the automatic version of the Nano as well as a new hatchback that will replace the Indica eV2. Nissan's Datsun is also readying the launch of its own hatchback also based on the CMF-A platform. Honda is said to working on a new hatchback.

Further Hyundai will launch a new compact SUV followed by a sub-4 meter SUV from car market leader Maruti Suzuki. Mumbai-based Mahindra & Mahindra, which has lost a substantial chunk of market share, is eager to regain the share through the launch of two UVs this year. Tata Motors and Honda will also launch their compact SUV next year.