After months of deliberations, Carlos Ghosn-led French carmaker Renault has finally decided to exit its loss-making joint venture with Mahindra & Mahindra (M&M) for the Logan, handing out full control to the Indian auto major that will now reposition the car with a new branding and name along with lower price.
Officials from both the companies Friday announced a "restructuring" of the 2005 JV — Mahindra Renault Pvt Ltd (MRPL) — that would see M&M buy Renault's 49% equity and gain full control while still purchasing engines, transmission and key components from the French car company, that would now be paid a royalty fee on sale of the car.
"The new agreement will give us the opportunity to chart out a new strategy to help drive the Logan brand in India which will also include engineering changes, in keeping with customer requirements," M&M's automotive sector president Pawan Goenka said, though refusing to divulge financial details about the transaction.
Sales of the Logan — originally targeted at 50000 units annually — failed to pick up after a decent start in 2007. They plunged 60% at 5332 units last fiscal even when the domestic car market gained at the fastest pace in six years to 1.53 million units. The JV is estimated to have lost about Rs 490 crore in the year ended March 31, 2009.
As per the new agreement reached, M&M will continue with the Renault name and logo on the Logan till the end of 2010 and over the course of a transition period of about 18 months, it will rename the car and then only display M&M's logo. Also, the company is expected to reduce the length of the car and bring down the petrol engine capacity to bring it in tune to the Indian government's small car definition, that would help it position the car cheaper due to a lower excise duty of 8% against the current 22%.
Source: http://timesofindia.indiatimes.com/biz/india-business/Renault-to-exit-Logan-JV-with-Mahindra/articleshow/5823117.cms
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