Renault holds back further investment in JV with Nissan

French auto maker Renault has decided to "suspend" its proposed investment in the Rs4,500 crore plant at Oragadam near Chennai, which it is building jointly with Japan's Nissan Motor, even as its equal partner has shown no such withdrawal symptoms.

"Renault would defer its investment in the assembly line for its cars till the economic situation improves. Our commitment to invest in the Chennai facility and in India remains undiluted," Renault general manager for Indian operations Marc Nassif told DNA newspaper.

There has been talk that Renault may pull of the joint venture Renault Nissan Automotive India. Nissan on its part has already fulfilled its construction commitment at Oragadam as per the agreement signed with Tamil Nadu in February 2008.

A senior official of the Tamil Nadu industries department said the state government has no formal intimation of any change in plans of the joint venture. "We haven't received anything on Renault suspending its investment," he said.

It is not the concern of the government to intervene in the business of private companies or joint partners, the official added. "The government is only concerned about industrial development and the MoU is a package of support offered by the government ... we can't interfere in the internal matters of the joint venture, but only seek periodic reports on the progress of the project," he said.

Nissan on its part sounded extremely positive about the project as late as Friday, when K Tokuyama, managing director and chief executive, Nissan Motor India, said Nissan plans to make India a key manufacturing location for its compact cars, including its current offering Micra. (See: Nissan's Chennai plant to become export hub). 

Both companies initiated work on the Rs 4,500 crore, 400,000 units per annum plant at Oragadam in June last year. This was after the share in investment among the partners was rearranged after the withdrawal of utility vehicle maker Mahindra & Mahindra from the originally tripartite venture.

Currently, Renault imports all its engines (petrol and diesel) for the Logan sedan (built jointly with Mahindra) from Romania and Spain, as sale volumes of the car are low. But since the localisation content is low, it has pushed up the overall cost of the car.