Mahindra Renault JVfailure

Presented by – Dinesh, Gaurav, Govind &Deepali

 MAHINDRA &
MAHINDRA
• US$ 3 Billion Mahindra Group
• Mahindra & Mahindra Automotive Division is the
flagship company of the Mahindraconglomerate.
• Founded in 1945
• Leading player in the farm equipment,commercial
vehicles and utility vehiclessegment
• Wide portfolio - twowheelers, light and heavy trucks,
SUVsand schoolbuses.
• Largest manufacturer of tractors inIndia.
• Vehicles in India include Scorpio, Reva-i, Verito, Bolero,
Xylo, XUV500.
 RENAULT
• Renault S.A. is a French automaker producing cars,
vans, auto-rail vehicles, trucks, tractors, vans, tanks,
and also buses/coaches. Its alliance with Nissanmakes
it thefourth-largest automotive group.
• France’s second largest car maker.
• Leading electric car development among major car
companies, investing € 4 billion over the next 3-4years.
• Known for its role in motor sport, and its success over
the years in rallying and Formula1.
• Cars in India include Duster, Fluence, Pulse,
Koleos.
 HOW THEJV
WASFORMED

• Renault designers visualized a robust, low-cost car, under

€5000, which became a big hit in Europe.
• M&M thought of snatching the opportunity in India.
• Renault - important expertise about design, engineering &
construction, innovative and safe vehicles worldwide.
• M&M - wide cost-effective supplier base, brandname,
experience.
• Thus M&M entered into a JVwith Renault in 2005 to take
advantage of each other’s strengths and capture the Indian
market.
• The JV,51% owned by Mahindra & Mahindra and 49% by
Renault, then set up a state-of-the-art manufacturing plant in
Nashik in Maharashtra, India to roll out their Logan in 2007.
 POTENTIAL
• India - one of the fastest growing car markets in
the world.
• According to SIAM (Society of IndianAutomobile
Manufacturers), the Indian passenger carmarket
is expected to grow from the current 2.5 million
to 4 million units by 2015.
• CAGRof 24.3% for 2005-09 and industry forecasts
estimate the passenger car market to grow at
20.1% by 2014.
 RESULTS
• Although the great industrial might of France along with
innovative designs , French automobile giants like Renault
have always had it very difficult here inIndia.
• When launched in April 2007 – target sales of 2,500 cars a
month. Actual sales one-fifth of that, at just under 500 cars a
month, Even the festive season was unable to turn their
fortunes, with sales plunging 71 per cent year-on-year in
September 2009.
• The result: A loss of Rs490 crore in the year ending March 31,
2009. In 2010, Logan saw a 60.3%1 drop in sales compared to
the previous year. The Rs580 crore consolidated losses and
impairment of assets had eroded equity value.
• The venture was dissolved in April 2010.
REASONSFORFAILURE

• The question - “Would people buy the new Logan when there was
already a readymade market for a sophisticated and reliable sedan
at a low price – Swift Dzire?”
- Expectations rose compared to Indigo and Dzire.
- No Real value for a Logan with its price tag.
• The economic situation – Logan was launched in 2007, just before
the crisis of 2008. Like everywhere, India was also affected.. Maybe
the Indian market never placed its love in theFrench car, especially
after their wallets felt thepinch.
• Not enough Market Research - Aesthetic mismatch with Indians who
have been pampered by Hyundai for quite some time now. Logan
failed to account for modernity and luxury (something which was
expected due to its French connection). Indians didn’t like the
design of the Logan. They felt it looked old-fashioned. (originally
designed for Eastern European markets).
• Dual Excise Duty measure - New measure in 2008, approx. 24%
duty on vehicles over 4 m long. The Logan measures 4.25 m.
Caught in a fix
-too expensive for low costcars
-too small torival the higher standard cars.
• Marketing Failure - M&M’s image: tough, reliable, rugged and
economical vehicles, but the company’s products are not perceived
as modern or technologically advanced. Logan had great power,
performance and space, but failed to communicate the message.
• Dent reputation - Strong demand only in thedial-a-taxi segment..
• Priced higher than what should have been – localization content
(the percentage of parts sourced locally) of the car, which is at 50
per cent, was much lower than competition and thereby has
pushed up the final cost of the car (high import costs of engine and
gearbox).
• Rated poorly in most dimensions. What is even more
surprising is that even though Mahindra Logan
highlights price and mileage, it has been rated poorly in
these aspects too. This is clearly due to its ambiguous
positioning.
• Another Marketing Flaw: The only point where Logan is perceived
favourably i.e. spaciousness has a limited appeal to customers after some
level. Ironically, the company has emphasized on spaciousness as one of the
main factors.
• Culture Difference:Senior car analyst - “About declining sales, I think
Renault thought that weare Third World, and they are the most ultimate
humans that produce the best cars in the world. Placed the Logan badly in
Indian market with relatively dull powertrains, so what they expected ? That
Indians will lap up the Logan in that format ?
IMHO,there is something wrong with Renault. Specially the attitude they
carry around is responsible for low sales and not M&M."
• All in all, it seems that Logan was not ideally suited to the Indian market.
Expecting to ride on its success in the emerging Eastern European markets
was a risky decision which felt flat in Incredible India. Maybe, muchmore
efforts in Indian-izing the car, its interiors as well as marketing is the need of
the hour for all foreign companies.
 TAKING THEPOSITIVES
• M&M now has the proficiency of building modern,
technologically-advanced cars, much better thanTata’s
Indigo or Indica.
• Renault will continue to supply engines and
transmissions to M&M.
• Now that M&M has full right to manufacture and alter
the platform, it can loosen its engineering capability to
come up with a better-looking Logan or evenvariants.
• As far as exports are concerned, Logan in right-hand-
drive format can be exported to South Africa and this
can be followed up with othernations later.
 To sum it up…
• M&M and Renault dissolved their JVin 2010 - poor
response to the no-frills Logan, failed to enthuse the
market, saw the two partners blame each other forthe
dismal performance. Big losses suffered.
• M&M bought out Renault's 49% equity , gaining full
control over the company.
• M&M renamed the 'Logan' sedan as 'Verito', thus
completely dropping the French automaker Renault's
badge from the entry levelsedan.
• Although Renault has quit the JV, it will continue to focus
on the Indian market - set up its own independent sales
and distribution network, new cars Fluence and Duster.