MUMBAI: Bajaj Auto and Renault's plans of launching an ultra small car to take on Tata Motors' Nano may get delayed once again as a new set of differences over branding crops up between the two partners.
Rajiv Bajaj, managing director of Bajaj Auto, told a press conference in Mumbai on Thursday that there are issues over branding and a final joint venture agreement has still not been signed.
The development is an ominous sign for the joint venture as more than a year has passed since the MoU was inked with a lot of fanfare by Mr Bajaj and Mr Carlos Ghosn, chairman of Renault and Nissan. The formal deal was supposed to be signed in November last year but was pushed back.
Both partners are already sparring over the design, positioning and some technical specifications of the new car. ET, in March, had said that Mr Rajiv Bajaj had ordered scrapping of the work done so far on the project, and had demanded major modifications in design, positioning and other
details. This development is likely to make the combine miss 2011 deadline for launching the car, ET had said. Tata Motors' Nano, launched in April this year, has already received bookings for over two lakh vehicles and the car is likely to hit the road some time later this year.
The latest set of differences over branding has the potential to further delay the launch, affecting the ambitions of both Bajaj and Renault. A successful launch is important for Bajaj to reposition itself as a complete automobile company rather than a motorcycle manufacturer. On the other hand, India is crucial to Renault's plans of driving sales and expanding global market share in the backdrop of declining growth in the western world.
A Renault spokesperson in India declined to comment on the status of the talks but a person close to both the groups said that the two are yet to settle issues over engine and over all car design.
Mr Bajaj, when asked specifically whether there was friction over issues relating to the ultra low cost car, tried to play it down. "Our partnership (with Renault) remains unchanged and our views on all matters are congruent. We continue to work together, adding that since his company is a 'non-entity in the car space' it had to develop a unique vehicle that no global car major can engineer in terms of profitability and viability," he added.
However, it is clear that the partners have some major differences.
While Renault-Nissan has been in favour of a cost competitive car to take on the Tata Nano in the highly price conscious Indian market, Bajaj Auto has always stressed on fuel efficiency over price. The design of the ultra low cost car was frozen in late September 2008, and work on the power train - the engine and transmission combine also called the heart of the car - was continuing. Some time early this year, it was abruptly called off by Mr Bajaj who wanted to redo the whole thing.
Renault COO Patrick Pelata admitted at the recent Geneva Motor Show in March that the Bajaj Auto MD was unhappy with the design and positioning of the proposed ultra-low-cost car. A Renault India official had said at that time that the project would be delayed by at least five to six months.
The second major difference has occurred over the branding. Sources say that Bajaj is not keen on the Renault-Nissan name playing a dominant role and is keen on the Bajaj name retaining the upper hand.
"We have not signed the JV as yet as we need to establish a clear brand identity. We have learnt a lot from our two-wheeler technological alliance partner Kawasaki on co-branding and we do not want to compromise on our Bajaj brand. Negotiations are still going on over branding," Mr Bajaj said.
The issue may relate to Bajaj's early experiences with the Kawasaki brand which was used in the early bikes that Bajaj launched in the mid 1990s.
The Pune-based two-wheeler major did not taste much success with the Kawasaki branded motorbikes. Its first big hit was the Pulsar and the Boxer, both launched under the exclusive Bajaj name.
Meanwhile, Bajaj Auto on Tuesday reported that net profit for the fourth quarter ended March rose 8% to Rs 130 crore despite a VRS charge of Rs 61 crore and forex loss of Rs 22 crore. Net sales dropped 10% to Rs 1,787 crore. "New launches and lower input costs helped the company," Mr Bajaj said.
Operating margins rose to 15.2% from 12.6%. However, this figure does not include a loss on cancellation of excess forward contracts of Rs 12 crore and charge on actual valuation on pension scheme of Rs 5 crore.
For the year ended March 2009, net profit fell 13% to Rs 656 crore thanks to VRS charges and forex losses. Net sales also slipped 3% to Rs 8,436 crore.
The Pune-based two wheeler major expects new launches to drive double-digit growth in motorcycles sales in the current year after volumes fell 11% at 21.94 lakh units in the last fiscal year. Mr Bajaj, however, said that flawless and timely execution of product plans and consequent production ramp up could be challenges, while sustainability of exports growth, despite showing signs of revival since April 2009, needed to establish consistency.
Mr Bajaj said a strong product offensive that includes two new motorcycles in the commuter segment and 2 new three wheelers this year should give it a better balance across segments. "We see a greater growth for two-wheelers from the domestic market this year. We need to get the product portfolio right and that should happen with the new launch in July this year," Mr Bajaj said. The board recommended a dividend of Rs 22 per share amounting to Rs 372 crore.
For the current year, the company has hedged worth $535 million in the range of Rs 47to 55 per dollar. Bajaj shares rose 5.7% to Rs 934.2 on Thursday.
SOURCE: ET
