Monday, May 12, 2008

Bajaj along with Renault-Nissan to Produce $2,500 Car in India by 2011

Now, it seems that Tata Motor’s Tata Nano car, dubbed as world’s cheapest car, is going to have a strong competitor in the Indian car market. Today, India’s Bajaj Auto Limited (BOM:500490), a flagship of Bajaj Group, as well as Renault-Nissan declared to form a joint venture in order to launch an entry level car with a price tag of 100,000 Rupees (2,500-dollar and 1,600-euro).

Carlos Ghosn, president of Renault-Nissan, announced the joint venture with India’s Bajaj Auto last November. The newly form joint ventures is planning to launch its $2,500 car by early 2011. The car is so far known as by its codename ULC. Initially, ULC is targeted to Indian car market, but the joint venture company could export in the other car markets later.

This is the second effort to make a small car worth Rs. 100,000 for the Indian market. Earlier, Tata Motor came up with the country’s first $2,500 car ‘Tata Nano’, which is considered to be the cheapest car in the world. Tata Nano is expected to be launched in Indian market later this year.

ULC car will be manufactured in a plant to be built in Chakan, Maharashtra. 400,000 units of ULC car will be produced from the plant. Bajaj is well-known for its motorbikes and in fact, it is the second largest motorbike manufacturing company in India. Tata Nano is likely to affect the two wheeler market of India in what it would also affect Bajaj. However, the ULC car seems to be a counter attack from Bajaj for Tata’s Nano. So, Tata Motor will definitely try its best to grab as much market share as it could until Bajaj and Renault-Nissan launch its $2,500 small car in India.

The joint venture of Bajaj and Renault-Nissan is aimed to provide fuel efficiency with its Rs. 100,000 car. The company is planning to provide 34 kilometers (21 miles)/ liter of fuel. So, in terms of fuel efficiency, ULC car might have an edge over its competitors in the market.

Bajaj will have 50 percent share of the announced joint venture company, while French auto maker Renault and Japanese auto maker Nissan will have 25 percent share each. A large part of Indian car market belongs to small car segment and the segment is growing rapidly as number of middle class people has been increased over the last few years in India. In fact, more than two third of domestic car sales belong to small car segment. That is why, domestic and foreign car makers are keen to come into small car segment of Indian car market. Now, let us see if ULC brings out success in India’s ever increasing car market.

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