The two signed an agreement, earlier this week, allowing M&M to take over the operations of the company, while Renault will continue to support the product through a license agreement and supply of key components, including the engine and transmission.
In effect, Mahindra Renault will become a wholly owned M&M after the buy out and the latter will be responsible for the management of the Logan in the Indian market. Briefing reporters, M&M president (automotive & farm equipment sectors) Pawan Goenka said “the new agreement will give us the opportunity to chart out a new strategy to help drive the Logan brand in India.”
Renault Executive Vice-President Asia/Africa, Katsumi Nakamura said “Renault will continue to extend support to Mahindra to help in gaining market share.”
M&M will continue to use the Renault name and logo on the Logan till the end of this calendar year, even though the transition period runs up to 18 months. With this, Renault finally exits from the JV with M&M after ending months of differences over production of entry-level sedan Logan in India.
During the transition period, M&M will rename the car to Mahindra owned brand name and shall only display Mahindra logo. M&M Chief Executive – Automotive Division Rajesh Jejurikar said: “Renault will chip in its share of debt in the JV and the valuation has been arrived on the impaired value of the assets.” He also said that the licensing pact,
however, will not cover other vehicles built on the Logan platform such as the Sandero. On exports, he said, M&M can export to Bhutan and Nepal, besides the primary batch to South Africa will continue. The Logan was commercially launched in the Indian market in July 2007 and sold over 44,000 units till date, while more than 2,600 units had been exported to South Africa and Nepal. Last fiscal, its sales begin to dwindle and to remedy the situation, M&M mooted the idea or pruning the size of Logan to derive the excise duty benefits of small car definition, but Renault was not in favour of making any country-specific change in the car.
The partners had envisaged an investment of Rs 600 crore in the JV and its annual turnover was over Rs 500 crore in the fiscal 2009 and less than that in the fiscal 2010, said an M&M official.
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