Renault to invest in car engine facility in India

French auto maker Renault, still battling financial blues, is planning to set up an engine and transmission facility in India with Nissan, its partner. This new plant is expected to come up adjacent to the vehicle manufacturing complex of Renault-Nissan at Oragadam, near Chennai.

A powertrain plant will allow Renault to locally supply the engines and transmissions for the troubled Logan sedan to erstwhile partners Mahindra & Mahindra (M&M) when the latter launches a new version of the car. This would drive down the cost of the Logan substantially and make it more competitive, as the engine and transmission unit accounts for 35-40 per cent of the total cost of the car.

M&M is presently forced to procure a variety of engines and transmission for the Logan directly from Renault’s manufacturing base in Romania and Spain, after paying hefty import charges. M&M imports the 1.4-litre and 1.6-litre diesel engines and the 1.5-litre petrol engine for the Logan. M&M on Thursday had announced a reduction of as much as Rs 80,000 on the Logan, although no engineering changes were to be made to the car. M&M last week bought Renault’s stake in the loss-making joint venture company, Mahindra Renault Private Ltd, taking full management control.

Rajesh Jejurikar, chief of operations, automotive division, M&M, said, “Renault has independent plans for making engines locally. We will source the engines for the Logan from them at later stages.”

When asked, a Renault spokesperson confirmed the move, stating, “Having an engine and transmission plant in India is a part of Renault’s long-term strategy. This plan was put on hold when the financial environment had deteriorated but now it has been revised. However, there is no final decision taken on the time line for the new facility.”

Although financial details of the engine plant has not been made public by either Renault or Nissan, typically an engine and transmission plant entail a minimum investment of anywhere between Rs 900-1200 crore, depending on the size of the plant.

This new plant will cater to Renault, Nissan and M&M when it comes onstream in the next few years. Although Nissan and Renault would largely make use of similar engines, both companies will have the liberty to tweak the engine power according to their requirements.

Both companies will also look to share vehicle platforms and technology to save on costs. The south India plant of the joint venture company has seen an investment of around Rs 4,500 crore and will have a total capacity of 400,000 units per year.

M&M, market leader in the utility vehicle segment, is planning to make multiple use of the platform on which the Logan sedan is based to make it more commercially viable. Though the Mumbai-based company lacks expertise in making cars (which includes design, engineering and total development of the vehicle from scratch), company executives say it is in talks with Renault for this.