Renault quitting the money-losing joint venture with Mahindra & Mahindra

Article by Christian Andrei, on August 29, 2010

After having had very low sales for the Logan model, Renault has announced that it will back out of a joint venture with India's Mahindra & Mahindra. Instead, Renault will be concentrating on other projects in the emerging market.

As European carmakers rise up from the economic recession and its effect in the car industry, the focus of these companies has shifted to the markets in Brazil, Russia, India and China.

This shift in their attention to the potential in these car markets is made all the more urgent with the scrapping of incentive schemes in mature markets.

Last Friday, it was announced that Mahindra & Mahindra will buy out Renault's 49% stake in the joint venture that produces and sells the Logan sedan in India.

However, Renault will not halt its support of Mahindra and the Logan car through a five-year license agreement and the supply of key components, including the engine and transmission.

In a joint statement, it was revealed that under their agreement, Mahindra has complete ownership of the Logan, but limited re-engineering rights to refresh the product.

Renault will also allow Mahindra to use its name and logo until the end of 2010. A total of 7.5 billion rupees ($169 million) had been invested in the joint venture by the two partners, according to Pawan Goenka, Mahindra's automotive sector president.

Goenka added that the company is looking forward to making the Logan more successful under Mahindra & Mahindra. He further said that it was a mutual decision and that in no way does being a solo player change its target of being a core player in SUV.

Jatin Chawla, analyst at brokerage India Infoline thinks that this change won´t be too much of a positive for Mahindra." A spokeswoman from Renault refused to comment on the financial details of the buy-out.

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