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26. April 2010

Renault to invest in car engine facility in India

French auto maker Renault, still battling financial blues is planning to set up an engine and transmission facility in India with Nissan, its partner. This new plant is expected to come up adjacent to the vehicle manufacturing complex of Renault-Nissan at Oragadam near Chennai.

A powertrain plant will allow Renault to locally supply the engines and transmissions for the troubled Logan sedan to erstwhile partners Mahindra & Mahindra when the latter launches a new version of the car. This would drive down the cost of the Logan substantially and make it more competitive, as the engine and transmission unit accounts for 35 to 40% of the total cost of the car.

M&M is presently forced to procure a variety of engines and transmission for the Logan directly from Renault’s manufacturing base in Romania and Spain, after paying hefty import charges.
When asked, a Renault spokesperson confirmed the move, stating that “Having an engine and transmission plant in India is a part of Renault’s long term strategy. This plan was put on hold when the financial environment had deteriorated but now it has been revised. However, there is no final decision taken on the time line for the new facility.”

Although financial details of the engine plant has not been made public by either Renault or Nissan, typically an engine and transmission plant entail a minimum investment of anywhere between INR 900 crore to INR 1200 crore depending on the size of the plant.

This new plant will cater to Renault, Nissan and M&M when it comes on stream in the next few years. Although Nissan and Renault would largely make use of similar engines, both companies will have the liberty to tweak the engine power according to their requirements.

Both companies will also look to share vehicle platforms and technology to save on costs. The south India plant of the joint venture company has seen an investment of around INR 4,500 crore and will have a total capacity of 400,000 units per year.

 

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