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Business

Renault ends Indian car alliance over Logan flop

Text by News Wires

Latest update : 2010-04-16

Renault has pulled out of a joint venture with Indian carmaker Mahindra over the poor performance of the Logan car. But the French manufacturer says it has no plans to leave the fast-growing Indian market.

AFP - Renault has pulled out of a joint venture with Indian car manufacturer Mahindra and Mahindra which produced its first car for the growing South Asian market, the Logan, the companies announced Friday.

The Logan was launched in 2007 by the joint venture -- 51-percent owned by Mahindra -- but its sales have struggled since amid criticism by some car experts of its boxy, dated design and fierce competition.

"The parties have in principle agreed that M and M will take over the operations of the company," the companies said in a statement which did not say how much the stake had been sold for by Renault.

The Logan is the only passenger car sold by India's Mahindra, which has traditionally been a large manufacturer of two-wheelers, tractors and jeeps.

Analysts say the French car maker is keen to establish an independent presence in India, having already announced it will launch the Micra small car in India in July this year with Japanese partner Nissan.

The Renault-Nissan car-making alliance has also confirmed plans for another small car in the future with another local partner -- motorcycle and scooter manufacturer Bajaj Auto.

Renault's chairman Carlos Ghosn had said earlier this year that he was discussing the future of the relationship with Mahindra in an open way, where "both can find their own interests."

The Logan, a mid-sized car priced at 450,000-570,000 rupees (10,150-12,850 dollars), has seen a gradual dip in sales in the past two years, hit by growing competition and higher prices, due to taxes.

Logan sales have dipped from a peak of around 2,000 per month in 2008 to about 350 in March this year amid competition from mid-sized cars from rivals Tata Motors, Hyundai and Ford Motors, analysts say.

"The Logan will now be re-engineered and re-designed as a Mahindra product, starting in the next two to three months," Pawan Goenka, president of Mahindra and Mahindra said.

Rajesh Jejurikar, chief of car operations at Mahindra, said the group sees the change "as an opportunity to strengthen our presence in the car segment."

Renault and Mahindra said they had sold 44,000 Logans in India and exported 2,600 units to South Africa and Nepal since 2007.

As part of the agreement, the French company will continue to supply key parts of the Logan, including the engine and transmission, the companies said.

The Logan will be sold exclusively as a Mahindra car by the end of the year.

"The Logan's future will depend on how Mahindra positions the car now," said Vaishali Jajoo, auto analyst with Mumbai-based Angel Broking.

Date created : 2010-04-16

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