Mahindra & Mahindra entered into a joint venture with Renault in 2005 to produce the Renault Logan sedan in India. The goal was to take advantage of each other's strengths - Renault's automotive expertise and Mahindra's local supplier network. However, the Logan failed to meet sales targets in India. It was perceived as outdated and overpriced. The joint venture dissolved in 2010 due to major financial losses. While Renault exited India, Mahindra renamed the Logan as the "Verito" and gained control over production.

1. The Curious Case of
Mahindra Renault

2. Mahindra &
Mahindra
 US $ 3 Billion Mahindra Group
 Mahindra & Mahindra Automotive Division is the flagship
company of the Mahindra conglomerate.
 Founded in 1945
 Leading player in the farm equipment, commercial vehicles and
utility vehicles segment
 Wide portfolio - two wheelers, light and heavy trucks, SUVs and
school buses.
 Largest manufacturer of tractors in India.
 Vehicles in India include Scorpio, Reva-i, Verito, Bolero,
Xylo, XUV500.

4. Renault
 Renault S.A. is a French automaker producing
cars, vans, autorail vehicles, trucks, tractors, vans, tanks,
and also buses/coaches. Its alliance with Nissan makes it
the fourth-largest automotive group.
 France’s second largest car maker.
 Leading electric car development among major car
companies, investing € 4 billion over the next 3-4 years.
 Known for its role in motor sport, and its success over
the years in rallying and Formula 1.
 Cars in India include Duster, Fluence, Pulse,
Koleos.

6. How the JV
came into picture
 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, brand name, experience.
 Thus M&M entered into a JV with 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.

7. Potential
 India - one of the fastest growing car markets in the
world.
 According to SIAM (Society of Indian Automobile
Manufacturers), the Indian passenger car market is
expected to grow from the current 2.5 million to 4
million units by 2015 .
 CAGR of 24.3% for 2005-09 and industry forecasts
estimate the passenger car market to grow at 20.1%
by 2014.

8. Did it work?
 Although the great industrial might of France along with
innovative designs , French automobile giants like Renault
have always had it very difficult here in India.
 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 Rs 490 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 Rs 580 crore consolidated losses and
impairment of assets had eroded equity value.
 The venture was dissolved in April 2010.
THINKING AFRESH: M&M Automotive and Farm
Equipment sector Presidnet Pawan Goenka (left), and
Chief Executive (Automotive Division) Rajesh Jejurikar at
a press conference in Mumbai

9. Reasons for Failure
 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 the French car, especially after their
wallets felt the pinch.
 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).

10.  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 cost cars
-too small to rival 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 the dial-a-taxi segment..
 Priced higher than what should have been – localisation 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).

11.  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.

12.  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 we are 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, much more efforts in Indian-izing the car, its interiors as well as
marketing is the need of the hour for all foreign companies.

13. Taking the positives
 M&M now has the proficiency of building
modern, technologically-advanced cars, much better
than Tata’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 even variants.
 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 other nations later.

14. To sum it up…
 M&M and Renault dissolved their JV in 2010 - poor response
to the no-frills Logan, failed to enthuse the market, saw the
two partners blame each other for the dismal performance. Big
losses suffered.
 M&M bought out Renault's 49% equity in MRPL, 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 level sedan.
 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.

15. Bibliography
 http://www.carazoo.com/article/3004201001/Adieus-
to-the-Indo-French-Mahindra-Renault-Joint-Venture
 http://news.in.msn.com/business/article.aspx?cp-
documentid=3388874
 http://post.jagran.com/Year-after-breaking-joint-
venture-with-French-automaker-Mahindra-drops-
Renault-badge-1303722773
 http://www.financialexpress.com/news/mahindrarena
ult-jv-to-be-recast-soon/597262/2
 http://tejas-iimb.org/articles/95.php

16.  Abbas Hussain – 3
 Nikunj Jalan – 25
 Prakhar Jain – 27
 Sandeepa Sharma – 39
 Sanket Sangani – 40
 Siddharth Singh - 45
 Adit Mittal – 55
 Samiksha Singh – 57