The Hindu Business Line : Renault puts Sandero hatchback plan on hold

The French automaker had initially planned to roll out the Sandero from its Rs 4,500-crore Chennai facility being commissioned with global ally, Nissan.

Murali Gopalan

Mumbai, March 27 Renault’s plans to manufacture the Sandero hatchback in India have hit a roadblock thanks to an “inappropriate cost structure” which makes it an unviable option for the moment.

“The issue boiled down to getting the economics right which was not happening to the extent desired. This was particularly important at a time when customers are just not buying cars because of the recession,” top industry sources told Business Line.

Codenamed B90, the Sandero was to have been manufactured at the Mahindra-Renault plant in Nashik which already caters to assembly of the Logan sedan.

The French automaker had initially planned to roll out the Sandero from its Rs 4,500-crore Chennai facility being commissioned with global ally, Nissan. However, thanks to the economic slowdown, the company had put this plan on hold. In any case, the annual capacity of 50,000 units at Nashik was lying underused since average sales of the Logan are barely a little over 1,000 units annually.

Pricing factor

The Sandero would have been the best bet in a market which is still largely inclined towards compact cars. However, the key would have been pricing which could have prompted Renault to give the plan a rethink.

“There would have been little point in introducing an expensive model and watch it gather dust in the showrooms. However, Renault will definitely revive the project once the recessionary clouds clear and there is no question of it being shelved,” sources say.

Whether this will result in the Sandero rolling out of the Chennai facility is a moot point because valuable time has already been lost in its commissioning date. Further, even though Nashik was intended as an interim arrangement, it still makes sense to produce the car here simply because there is enough idle capacity going around.

The Chennai project is an equal joint venture between Renault and Nissan. Mahindra & Mahindra was originally planned as the largest shareholder with a 50 per cent stake (with the other two global companies accounting for 25 per cent each) but dropped out.

M&M still holds 51 per cent equity in Mahindra-Renault which was solely intended to manufacture the Logan sedan at Nashik. All other derivatives, including the Logan Steppe station-wagon and Sandero, were planned for Chennai. “Hence, any move to manufacture the Sandero at Nashik would imply a contract manufacturing arrangement with Mahindra-Renault,” sources say.

Logan sales

The top priority will, therefore, be to boost sales of the Logan beyond the numbers it is currently generating.

The car promised plenty at the time of its launch given its keen price tag of Rs 6-7 lakh and the diesel engine advantage.

It began well but could not quite sustain the momentum in later months.

There is still a degree of apprehension among Renault’s ancillary suppliers in India that the pace of progress is a “bit too slow for comfort”.

However, the French company has constantly reiterated that the setback is only temporary and that things will look up after the slowdown. Nissan, however, is still going ahead with its plan to roll out two sub-compact cars from Chennai by end-2010.

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