Joint venture between Mahindra & Mahindra and Renault.

Mahindra & Mahindra is an automobile industry in India. In 2005 Mahindra & Mahindra had a joint venture agreement with Renault which is a French car manufacturing company to produce and commercialize Logan. The joint venture is a 51:49 partnership between Mahindra & Mahindra and Renault. The Logan plant at Nasik has a capacity to produce 50,000 units per year (Mahindra, 2010). The main aim of this joint venture between these two companies is to produce no-frills Logan car with class-defying features at an aggressive price & launch them exclusively for Indian market (BBC news, 2006) with the advantage of using dealers of Mahindra in order to reduce the time required to increase the market shares (Economic Times, 2007). This suggests that there was a technology requirement in Indian automobile market which demanded no-frills spacious cars with middle class customers as their target. The Renault chief execute Carlos Ghosn wanted to increase the global car sales by 800,000 by year 2009 & he believed that this figure could be achieved by investing in Indian market as he spotted significant opportunities to gain massive profit in Indian market. The biggest challenge for this joint venture was to design a car model that suits Indian driving conditions which includes contemporary styling and design. Logan is supposed to be the unique product in its segment with above features along with the room for the middle passenger in the rear seat (Mahindra Logan, 2010).

Despite the positive attitude shown by this venture it was not a successful attempt to grab the vision sited by the Renaults CEO Ghosn. The main reason for its failure are the poor marketing strategies used by Logan such as pricing margin and poor localization. The expected sales of the car after its launched were 30,000 units per year or 2,500 a month. But instead the company managed to sell not more than 500 units per month. This fact suggests that this joint venture is a complete failure achieving only 20% of its forecasted target. The result of this failure is the expected losses of Rs 490 crore ($65 Mill. USD) in the year 2009 on sales of Rs 740 crore ($98 Mill. USD). One of the major reasons for the failure of this joint venture is the price margin issue. The brand tried to establish itself as a "low-price tag" car but failed to do so as it faced tremendous competition from its competitors like Maruti Suzuki & Tata motors who had already successfully established themselves with that tag. There were other factors contributing to the failure, such as, the company imported the engines from France which added to the production cost of the unit. They failed to understand the image of the brand and the car ended as tourist vehicle in Metro cities rather than complete family car (MSN news, 2009).

During the tenure of Joint venture between Mahindra and Renault, Renault had talks with Bajaj automobiles for another joint venture in India (Economic Times, 2008). So, it was not in the good spirit of Renault to have a Joint venture with another automobile company in India which might have upset the senior management of Mahindra and resulted in poor sales of Logan.

What does Mahindra and Renault has to do in order to gain Indian automobile market share and make this JV a success? what actions and in what level of priority would you recommend?