By IANS,
New York : After inking a deal with Bajaj Auto for a $2,500 car to compete with Tata Nano, Renault Nissan is entering the fray in India in the mid- to high-end car market.
Last week, Renault Nissan Automotive India, a 50:50 joint venture between the French and Japanese automakers, started construction of a $1.1 billion plant in Chennai to produce 400,000 cars a year starting 2010, Forbes magazine reported.
The plant will produce Renault’s Logan cars and Nissan’s Micras, which both target the mid- to high-end market.
The mid-priced car market is currently dominated by the Maruti 800, produced by Suzuki.
“The new project is a clear indicator of Renault Nissan’s long-term strategy for this important market,” Shohei Kimura, vice-president of the India project, was quoted as saying by the US business magazine.
The company calculates that despite an annual economic growth rate of over 8 percent, wages in India are still low in comparison to other emerging markets — average GDP per head is just $3,600 against China’s $8,000.
As a result, car sales in China are booming, but in India, cars have remained out of the reach of the vast majority of the population.
That’s one reason that Renault Nissan is cooperating with Bajaj Auto to produce $2,500-priced ultra-basic cars to attract motorcycle users in competition with Tata Nano, which too is in the same price range.
But Renault Nissan is riding on this scenario changing soon.
According to Landsbanki-Kepler equities analyst Pierre-Yves Quemner: “India is a would-be car market that is about to burst.”
He called the long-term prospects of Renault Nissan’s Indian venture very promising.