Renault-Nissan and India’s Bajaj Auto Anounce India’s Second Inexpensive Car

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May 13 – Close on the heels of the Tata's US$2,500 Nano announcement, Nissan Motor Co. of Japan and its French partner Renault SA will form a joint venture with Indian motorcycle maker Bajaj Auto Ltd. to produce a minicar in India that will cost as little as $2,500 reported the Wall Street Journal.

The budget car, which would cost 100,000 rupees in India, is so far only known as "Codename ULC." The joint venture would be 50 percent owned by Bajaj Auto, 25 percent by Renault and 25 percent by Nissan, a statement said.

The ULC will be produced at a factory to be built at Chakan, Maharashtra, in western India. It will eventually produce 400,000 units a year, the two groups said. Mr. Ravikumar, Bajaj Auto's vice president in charge of business development said the car will be exported using the global sales network of Nissan and Renault.

"(The small car) will offer twice the fuel economy than the existing products in the market," Bajaj Auto managing director Rajiv Bajaj had said earlier, with the firm aiming for 34 kilometres (21 miles) on a litre of fuel, said AFP.

Domestic and international automakers are racing to corner India's small-car market, which accounts for over two-thirds of domestic sales in the country of 1.1 billion people.

Manufacturers will remain committed to the small passenger segment despite rising raw material costs and the likelihood of slower economic growth in India.

"The incremental demand for small-cars is strong," says Piyush, whose firm forecasts 13-percent growth in the passenger car segment for the year to March 2009.

Other experts point out India could serve as an Asian export base for small cars.

"There has been a steady move by automobile makers to make India an export hub for the Asian region," says Bhavesh Shah, vice-president with brokerage Asit C. Mehta.

"Lower costs and technological advance are to India's advantage at this stage of development," he said.

Japan's Toyota Motor Corp. and Honda Motor Corp., among other firms, have also said they are mulling manufacturing low-cost cars as India's population becomes more affluent and trades up from motorcycles.