Renault To Replace India’s Rickshaw

Are rickshaws facing extinction? Oh-no. Couldn’t be. Not that popular ride in India.

But automakers are planning to replace rickshaws with cars. The most ardent automaker, by far, is Renault-Nissan.

Renault-Nissan CEO Carlos Ghosn touched down in India twice on Oct. 29, making pit stops in his frenetic bid to grab a piece of the emerging global market for ultra-cheap cars. After inking a joint venture for low-cost vans and trucks in Chennai with Ashok Leyland, he flew to Pune in his corporate jet to kick the tires at the factory of Bajaj Auto, India's No. 2 motorcycle maker and a potential partner in Ghosn's quest to engineer a $3,000 car by 2010, BusinessWeek reported. A project could surface any time now.

Tata Motors is hot on Renault's heels in a drive to manufacture and distribute the most affordable car in India. Ghosn needs to quicken the pace. In the race to develop the world's cheapest car for emerging markets, he's about to be lapped. India's Tata Motors intends to introduce its long-awaited $2,500 car next year.

In 2003, Tata Chairman Ratan Tata said the company will build a people's car for India costing 100,000 rupees ($2,500). Back then, the project was greeted with pervasive cynicism. Now, as the automaker prepares to unveil the daring experiment at the New Delhi Auto Expo, Western auto chiefs including Ghosn are starting to fret.

"The challenge is to build a low-cost car that makes money," noted Ghosn. At the Tokyo Motor Show in late October, Ghosn predicted Renault-Nissan could have a $3,000 car on the market by 2010, though he has yet to clinch a joint venture for the project in India. "We know Tata is announcing this car in the Indian market in 2008. And if Tata can do it, we can do it," Ghosn said in Tokyo.

Ghosn is keen to nab an Indian partner to do "frugal engineering" on a $3,000 car, since Indian engineers are more able to break with Western automotive traditions and think outside the box, he said. Western experts agree that engineers will have to entirely "rethink" how to dramatically slash production costs to produce a budget-friendly car without compromising quality.

"Low-price vehicles are not vehicles of inferior quality equipped with the most basic components," said Wolf-Henning Scheider, president of the gasoline systems division at German auto supplier Robert Bosch. "They are inexpensive technical solutions produced using state-of-the-art components."

During his visit to the Bajaj motorcycle plant in Pune, Ghosn and top execs of the Renault spent an hour in discussion with Managing Director Rajiv Bajaj, toured the plant, and spoke to workers about the opportunity Ghosn envisioned for a joint venture. He also took a ride in a Bajaj 3-wheel rickshaw—the popular, inexpensive vehicle that a $3,000 car would compete with.

Renault-Nissan already has partnered with Mahindra & Mahindra, a truck maker, in a joint venture to produce some 400,000 cars annually starting in 2009. Ghosn said a future $3,000 model might be exported to Western markets for $5,000.

"Cost is the main challenge, and we have to make it robust," Ghosn concluded.

Could Renault make us forget rickshaws? How about Kia shocks and other auto parts accessories? Let's see...