After six months of negotiation, Bajaj Auto today announced its joint venture with European car maker Renault and Japanese giant Nissan to manufacture a small car in India with a wholesale price tag of $2,500 (Rs 1.03 lakh).
The car, code named ULC, will hit the roads in 2011, three years after Tata Motors' Nano, which is expected to launch in October and is priced at around Rs 1 lakh.
A tripartite joint venture will be formed in due course, in which Bajaj will hold 50 per cent and Renault and Nissan 25 per cent each. The company will oversee the design, engineering and manufacturing of the ULC.
The three companies will shortly sign a memorandum of understanding (MoU) with the Maharashtra government for the plant, which will come up in Chakan, near Pune. The Maharashtra government had already earmarked 500 acres of land, of which around 200 acres will be reserved for a vendor base.
Bajaj Auto has finalised plans for its three- and "lite" four-wheeler project involving cargo and passenger carriers in Chakan and has a two-wheeler plant in the same location.
"It makes no sense for a separate greenfield plant in Chakan. We had made an announcement about producing three- and four-wheelers earlier at an investment of Rs 2,000 crore. Construction on that site hasn't started yet...it was just a plan," said Ravi Kumar, V-P, business development, Bajaj Auto.
The new plant will make Bajaj Auto's earlier three- and four-wheelers as well as the ULC car. The plant will have an initial capacity of 400,000 units a year, which can be ramped up depending on demand.
Nissan also has a venture with Ashok Leyland for light commercial vehicles and engines. The design and engineering of the car and its engine awaits approval from the three companies.
"Engineering teams from all the three companies are working together to finalise the plan. A prototype of the car is not out yet," Kumar added.
The engine for the car will be co-developed by the partners and not just by Bajaj Auto as was reported earlier. The vehicle will basically be a reworked version of the car showcased by Bajaj Auto at the Auto Expo earlier this year.
Other Bajaj executives said the key feature of the product would be its fuel efficiency, which will be at least double that of a competing small car in the country. With the Nano expected to give between 20 and 22 km a litre, the petrol version of the ULC could offer at least 40 km a litre.
Addressing the issue of rising raw material prices, the press release said, "The feasibility has already extended into joint product development and the project is on line to meet targeted performance and costs."
All three companies also intend to sell the car in other developing markets though India will be the primary market.
Renault and Nissan, which hold equity in each other, are both run by the legendary Carlos Goshn. Renault already has a joint venture with Mahindra & Mahindra for the Logan, while Nissan and Renault jointly produce cars and other vehicles in Chennai. Other auto makers who are in the race to build a car under Rs 200,000 are Volkswagen, General Motors and Hyundai.
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