Nissan, Ashok Leyland in talks for global small car

Nissan, which has already partnered with Bajaj and Renault, is in talks with Ashok Leyland for developing a below $5,000 small car for the global market

Japanese carmaker Nissan Motor Co Ltd on Tuesday said that it is in talks with Hinduja flagship company Ashok Leyland Ltd for developing a small car for the global market that could be priced around $4,500-$5,000, reports PTI.

The company, which is also a partner in the development of an ultra low-cost car with Bajaj Auto Ltd and Renault, said that the project is yet to find a solution to produce such a cheap car.

"We have a formal agreement with Ashok Leyland for making light commercial vehicles in India. In addition to that, we also use Ashok Leyland's engineering services for various purposes. At the moment we are talking to them and many other partners in China & Indonesia, for a price-centric vehicle," Nissan Motor executive vice-president Collin Dodge told reporters at the Geneva Motor Show.

He said that the global small car is aimed at tapping the price bracket of $4,500-$5,000, which is set to grow substantially and account for around "20% of the total global car sales in due course of time.”

"There may be an opportunity with Ashok Leyland on a price-centric car," Mr Dodge added. He said that none of the big global carmakers like Volkswagen, General Motors or Ford could produce a small car at such a cheap price without partnering with local firms already engaged in low-cost production.

Asked which country will be the lead market for such a small car, Mr Dodge said, "China will be the number one as the segment is growing in a big way there with about two million units. India will be the second market."

Other countries like Indonesia, Vietnam, Brazil, Colombia and some more Latin American nations are also possible markets, he added.

In India, the car could be positioned between Tata Nano at the lower end and Maruti Swift at the upper end.

At present, Nissan and Ashok Leyland are partners in a light commercial vehicle joint venture (JV). The two companies had announced three JVs in 2007 for making light commercial vehicles (LCVs), powertrains and developing technology, and setting up a plant near Chennai, envisaging a total investment of Rs2,300 crore.

The two companies had formed a JV—Ashok Leyland Nissan Vehicles—in which the Indian partner has 51% stake and the rest is held by Nissan, to manufacture LCVs. Ashok Leyland had earlier said that it would have no joint branding with Nissan for the LCVs.

The JV, at present, is developing both trucks and buses in the 3 tonne and 6 tonne category.

Due to problems in land acquisition, there has been a delay in setting up the manufacturing plant and so the partners have started producing LCVs from their respective facilities and plan to launch them by 2011.

Ashok Leyland Nissan Vehicles had set an initial target to produce 1 lakh units and the two partners had signed an MoU with the Tamil Nadu government to set up an integrated plant at Pillaipakkam, 40 km off Chennai.

Separately, Nissan also unveiled its fourth generation Mirca. The new Micra was designed and tested in Japan to be built in at least four overseas locations, and fine-tuned to meet the differing tastes and needs of customers in 160 countries worldwide, it said in a release.

Breaking with traditions that focused on launching production in established markets like Europe and Japan, Nissan will base production of the new Micra at overseas manufacturing sites such as Thailand, India, Mexico and China.

Kiminobu Tokuyama, managing director, Nissan Motor India Pvt Ltd (NMIPL) said, "The moment that we all at Nissan India have been waiting for has finally arrived. The all-new Nissan Micra will be our first 'Made-in-India' compact car and it will be manufactured at our soon-to-be inaugurated plant at Oragadam, near Chennai."

The fourth generation Micra has been designed in line with the discerning needs of the Indian customers and Nissan believes that it is the right product at the right time, he said.

"Nissan is on track to start production of this car in May 2010 and sales would commence in July 2010. We will also be exporting the Micra to more than 100 countries including 35 countries in Europe from September 2010," Mr Tokuyama added.

Sales of the new Micra will start in Thailand in March, in India in July and European sales will begin in November this year.


Hero Motors, ZF-Lemforder to invest Rs80 crore in new plants

The joint venture, ZF Hero Chassis Systems, has been formed after acquisition of 50% stake in Hero Motors' Chassis Systems by the German company for an undisclosed sum

The Munjals-promoted component maker Hero Motors Ltd on Tuesday said that it has formed a joint venture (JV) with Germany's ZF-Lemforder and both the partners plan to invest Rs80 crore over the next couple of years to operationalise two facilities for manufacturing auto parts for four-wheelers, reports PTI.

The JV—ZF Hero Chassis Systems—has been formed after acquisition of 50% stake in Hero Motors' Chassis Systems by the German company for an undisclosed sum.

"We will invest Rs80 crore over the next two years to set up two new plants in Gurgaon and Chennai to cater to the northern and southern markets respectively," Hero Motors' managing director Pankaj Munjal told reporters.

He said that the investment for the plants will come from the JV’s internal accruals and debts.

The JV is starting with two Hero Motors' plants at Talegaon in Maharashtra and Halol in Gujarat with an annual installed capacity for assembling 1.6 lakh units of chassis and axle systems.

"The two new plants will take our total capacity to 4.5 lakh units. We will start with focus on the small-car segment and then diversify into bigger cars," Mr Munjal said, adding that the target customers will be domestic original equipment manufacturers (OEMs).

Hero Motors, a subsidiary of the $4.50-billion Hero Group, has already invested around Rs4.60 crore for the two plants in Halol and Talegaon since acquiring them from US-based component maker Delphi in 2008.

Hero Motors already supplies chassis systems to General Motors for its various models and Mr Munjal said talks are now on to win contracts from other OEMs like Suzuki and Tata Motors.

Hero Motors also operates a JV with Japanese firm Sumitomo and has a technology agreement with Magna.


FDI in retail: Still a distant dream

The organised retail segment has been clamouring for foreign direct investment, but the recent Budget has not been forthcoming on this front

The organised retail industry has been awaiting a governmental nod for foreign direct investment (FDI) to boost capital inflows. However, some industry experts point out that the recent budget does not clearly approve the same.

In his Budget speech, finance minister Pranab Mukherjee had said that the government would address the issue of opening up of retail trade and will help to bring down the considerable difference between farm gate, wholesale and retail prices. The minister also mentioned that the ministry has developed schemes for setting up and operating of cold chains and storage facilities for the Food Corporation of India (FCI).

“This is certainly a step in the right direction.  However, it is still too early to say what it means for the sector as I would like to see the concrete measures that the government intends to take in this regard,” said Thomas Varghese, chief executive, Aditya Birla Retail Ltd.

Mr Varghese also pointed out, “The definition of service tax on rent has been widened to include services other than rent. The government has also retrospectively declared that no court cases can be maintained against levy of service tax on rent.”

The retail industry, which wanted to expand rapidly, will now have to go slow on expansion plans, as retailers now have to pay 10% service tax on rentals. In India, most retail space is rented as this has been a profitable model for the industry.

The finance minister’s speech also highlighted that the agricultural supply chain will see more foreign investment coming in. “My sense is that there will be foreign participation in the agricultural supply chain and possibly rules governing this will be rationalised to make it simpler and more attractive to invest and repatriate returns,” said Bijou Kurien, president and chief executive for lifestyle, Reliance Retail.

“We expected some roadmap at least for FDI, but it did not happen. We also expected an industry status to retail so that it is easy to bring in FDI. The service tax on rents is a big deterrent for the industry,” said Susil Dungarwal, founder and chief mall mechanic, Beyond Squarefeet.


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