French carmaker Renault said on Thursday it has shelved plans to enter Indian multi-utility vehicle segment in partnership with Mahindra & Mahindra, even as the two partners expect to finalise a marketing and distribution pact for the former's products in the country.
"We had a made a marketing study for a seven-seater vehicle. Unfortunately the response was not good, so we have shelved the project," Renault India Managing Director Sylvain Bilaine told reporters.
Renault and M&M had planned to bring the seven-seater MPV through their JV under which the French company's mid-sized sedan 'Logan' is manufactured and sold in India.
The MPV was displayed at the Auto Expo held earlier this year.
Bilaine said Renault has decided to go slow on bringing in light commercial vehicles to India.
"We are a prominent market player in Europe with our three products in LCV portfolio -- Kangoo, Trafic and Master. But these products are very different from Indian conditions," he said.
The company's plan was to look for 'potential partner', but now the plans are at 'ground level', he added.
At present, Renault is working on finalising the marketing and distribution agreement with M&M for all vehicles of the French manufacturers in India.
"We are trying to finalise the distribution agreement with M&M in the coming months. This will be for every passenger car coming into India, both produced from Chennai facility and imported," Bilaine said.
He said the current network of 104 dealers, which sell 'Scorpio' and 'Logan', would be expanded to distribute Renault cars rolling out of Chennai plant from 2010.
On the possibility of joint badging of Renault cars with Mahindra in India, Bilaine said:
"It has to be decided. Earlier we went with Mahindra for 'Logan' as our brand equity in the country was zero. It is still very low."
Renault is developing a greenfield car manufacturing unit in Chennai in equal partnership with its Japanese group company, Nissan at an investment of Rs 4,500 crore (Rs 45 billion), which would have an capacity of 4,00,000 cars per annum.
Asked if the company was disappointed with the marketing strategies of M&M due to declining sales of 'Logan', Bilaine said: "Yes and No. When we launched the car in 2004, it was one of the best at than time... but compared to our expectations it is slightly below."
The Indian market was maturing very fast and the company might have 'underestimated' the behaviour of the Indian customers, especially in the Northern states, he added.
On its 'ultra low-cost' car project with Bajaj and Nissan, Bilaine said it was 'on track' and the first car would be rolled out in 2011.
"In September, we have achieved a very important milestone -- we decided what will be the final shape of the car. We will try to have 100 per cent sourcing from India," he said.
The powertrain of the ULC has also been 'freezed', Bilaine added without giving details.
Asked if the companies would be able to roll out the car at the announced price tag (wholesale price $2,500), Bilaine said: "It is very challenging to maintain the price tag... rupee is plummeting, inflation is very high, global crisis, but the price will be very affordable and reasonable."
The car would primarily be for the Indian customers as the company look the country as its "core business" and only at a later stage it would explore possibilities to export it to emerging markets, he added.