Media Mates: MANAGEMENT COMPASS: In Focus

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Small car, big gains
Fuel economy of 30kms/litre at USD 2,500

No matter how much their much-hyped ultra low cost car project is delayed, Bajaj Auto and its partners Renault-Nissan have not given up on delivering an ultra low cost car that would take on the Tata Nano -- the world's cheapest car. At a time when Tatas are finding it difficult to produce its people's car Nano at Rs 1 lakh due to rising input costs, the tripartite partnership of Bajaj Auto, Renault-Nissan said they will produce a car that will cost USD 2,500 (about Rs 1.1 lakh) and deliver a fuel economy of 30 km per litre as they try to woo the segment of two-wheeler buyers as well.

Impressive price
At the Annual General Meeting of the company held earlier this month, Renault Chairman and CEO Carlos Ghosn stated, “In India, Renault and Nissan are developing an ultra low cost vehicle with the Bajaj group, benefiting from its expertise in the light vehicles and the knowledge of the Indian market. We are aiming for a price of USD 2,500.” Acknowledging that it was the agreed price for the ULC, Bajaj Auto Managing Director Rajiv Bajaj said more than the USD 2,500 price tag, the aim of the three partners was to develop a car that gives the least maintenance cost and also becomes the most eco-friendly car in India.

"We have been focusing on developing a car (so) that the monthly cost of ownership is low enough to motivate two-wheeler buyers to upgrade into a car. Our aim is to deliver a mileage of 30 km per litre," Bajaj said. The ultra low cost car (ULC), which will be competing with Nano (priced between Rs 1.23 lakh and Rs 1.72 lakh for its three variants), aims to better the mileage of 23.6 km/lt, given by the world's cheapest car from the stable of Tata Motors. On an average, the existing small cars in the Indian market give fuel economy of 15-18 km/lt. He said the company is learning from its motorcycle experience to come up with a product that would impress customers. "Our experience with motorcycles is that unless there is 50 per cent increase (in mileage), it is not considered good by customers. Our intention is to do a path-breaking job with that kind of fuel economy," Bajaj added.

The tricky issue
Not only the mileage, he said, the aim of the company but also was to deliver an eco-friendly product that could emit the least carbon dioxide and replicate what it had been able to achieve in motorcycles. "Indian motorcycles, be it those made by Hero Honda, TVS or Bajaj, they are the greenest in the world. I think the excellent technology that we have in two-wheelers should be brought to four-wheelers," he said. He said most of the cars in India have an average carbon dioxide emission of 140-150 grams/km, while the best in the world were at around 110-120 gm/km.

"What we are looking at our small car is a double digit level (less than 100 gm/km) of carbon dioxide emission per kilometre," Bajaj said. Tata Nano has an emission level of 101gm/km, which Tata Motors claims is the lowest among cars in India. Bajaj said with the small car project taking prominence, the company has "harmonised" its plans to develop a light commercial vehicle with the project. The ULC is scheduled to hit the market in 2012.

Bajaj Auto had entered into a partnership with Renault and Nissan to develop the ULC in 2008, but the project got delayed due to differences between the partners over design and pricing. Last year, the partners agreed to take forward the project by finalising respective responsibilities, with the Indian firm being responsible for the design, development and manufacturing. Renault-Nissan alliance will take charge of marketing and sales of the ULC under their badge. The partners have, thus, solved the tricky issue of pricing, which has been widely speculated as the reason for delay in the project announced in 2008.

While Renault wanted a low cost car, Bajaj was keen on a car that would have high mileage and low maintenance.

Market launch
Originally, the car was scheduled to hit the market this year, but that has been postponed to 2012. Tata Motors, however, is finding it difficult to maintain the price of the Nano as its vendors have started to demand increase in sourcing cost due to rise in rates of commodities, mainly that of steel and natural rubber. It has, however, maintained that the first one-lakh bookings will be delivered at the original price, while declining to comment on possibility of hiking it in future. Officials of the Renault-Nissan alliance had said that the ULC would be smaller than Maruti Suzuki's Alto, which is the prime selling model in India. The three partners of the ULC project have been struggling to find engineering solutions to produce such a low cost product.

In March this year, Nissan Motor Co Executive Vice-President Collin Dodge had said, "It is over two years that Bajaj is trying to produce the car. The physics of it is very difficult. We have not yet found a solution as there are a lot of engineering solutions required."

Rajkumar Leishemba

Test yourself
1. Will the low cost cars being launched in India have an adverse effect on the environmental condition?

2. With even Nano struggling with its initial price of Rs. 1lakh due to rising input costs, how far will Bajaj be successful in launching a car worth USD 2,500 (Rs. 1.1lakh) in 2012? Top