Nissan to join M&M-Renault partnership

Rex Mathew
23 February 2007

As speculated earlier, Nissan Motor is all set to join the M&M-Renault joint venture to set up a green field car plant in India. The Japanese auto major is said to have finalised its plans for India and has decided not to go it alone. A formal announcement is expected early next week, slightly earlier than a March deadline indicated by Nissan to arrive at a decision.

Nissan CEO Carlos Ghosn, who also heads Renault, is very keen on India. Over the last year, he has repeatedly emphasised the attractiveness of the country — both as a large emerging market and a very attractive manufacturing location. Ghosn had also stated that India would be one of the key focus markets for Nissan in future.

Nissan is struggling to keep pace with bigger Japanese rival Toyota in major markets like the US and Japan. After Ghosn pulled Nissan out of near bankruptcy in the '90s, the company achieved better than industry average growth in sales and margins for many years. However, in recent years Nissan has been struggling to sustain its growth.

Ghosn believes that much of the future demand growth would come from emerging markets like China and India. He also believes that a major part of auto manufacturing would also shift to these countries because of the cost advantages. As part of this vision, Nissan teamed up with Suzuki to build a export-oriented plant in India. However, this plan was later dropped though Nissan still has an agreement to source up to 50,000 cars per year for the European market from Suzuki's Indian subsidiary Maruti Udyog.

When the Renault-M&M partnership was announced last year, there was considerable speculation that Nissan had dumped the Suzuki JV only to join this alliance. At that time, Nissan said it was studying various options for its India strategy. The advantages of a joint India strategy with Renault, which owns 44 per cent of Nissan, were very obvious.

The M&M-Renault JV had proposed to set up a new plant with an initial capacity if 300,000 units per annum to be scaled up to 500,000 units later. Though not confirmed, it is learnt that the combine has finalised Chennai as the location. Other major automakers like Ford and Hyundai have plants in Chennai and the region has many established ancillary units as well. When Nissan joins the alliance, it may hold a combined 50 per cent stake with Renault while M&M is expected to hold the remaining 50 per cent. Other global automakers who are building large plants in India include General Motors and Volkswagen.