Tatas are finding it difficult to produce its people's car Nano at Rs 1 lakh due to rising input costs, but Bajaj Auto today said it will produce a car that will cost $2,500 (about Rs 1.1 lakh) in collaboration with the Renault-Nissan alliance.
Bajaj Auto had entered into a partnership with Renault and Nissan to develop an ultra low cost car (ULC) in 2008, but the project got delayed due to differences between the partners over design and pricing.
Last year, the partners agreed to take forward the project by finalising respective responsibilities, with the Indian firm responsible for the design, development and manufacturing. Renault-Nissan alliance will take charge of marketing and sales of the ULC under their badge.
When asked if $2,500 is the agreed price for the ULC, as announced by Renault Chairman and CEO Carlos Ghosn at the Annual General Meeting of the French carmaker last week, Bajaj Auto Managing Director Rajiv Bajaj said: "Yes."
On Friday, Ghosn had said: "In India, Renault and Nissan are developing an ultra low cost vehicle with the Bajaj group, benefiting from its expertise in the light vehicles and the knowledge of the Indian market. We are aiming for a price of $2,500."
The partners have, thus, solved the tricky issue of pricing, which has been widely speculated as the reason for delay in the project announced in 2008. While Renault wanted a low cost car, Bajaj was keen on a car that would have high mileage and low maintenance.
Originally, the car was scheduled to hit the market this year, but that has been postponed to 2012. It will take on Tata Nano, which is currently available in a price range of Rs 1.23 lakh-1.72 lakh (ex-showroom Delhi) for three variants.
Tata Motors, however, is finding it difficult to maintain the price of the Nano as its vendors have started to demand increase in sourcing cost due to rise in rates of commodities, mainly that of steel and natural rubber.
It has, however, maintained that the first one lakh bookings will be delivered at the original price, while declining to comment on possibility of hiking it in future.
Officials of the Renault-Nissan alliance had said that the ULC will be smaller than Maruti Suzuki's Alto, which is the biggest selling model in India. The three partners of the ULC project have been struggling to find engineering solutions to produce such a low cost product.
In March this year, Nissan Motor Co Executive Vice- President Collin Dodge had said, "It is over two years that Bajaj is trying to produce the car. The physics of it is very difficult. We have not yet found a solution as there are a lot of engineering solutions required."