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Renault to Double Use of Indian Parts Overseas to Cut Costs

The Renault SA logo is displayed at the company's stand during the Auto Expo 2010 in New Delhi. Photographer: Pankaj Nangia/Bloomberg
The Renault SA logo is displayed at the company's stand during the Auto Expo 2010 in New Delhi. Photographer: Pankaj Nangia/Bloomberg

May 11 (Bloomberg) -- Renault SA plans to more than double shipments of parts from India, cutting costs and boosting ties with suppliers as it reenters Asia’s third-biggest auto market.

The carmaker will buy as much as 250 million euros ($320 million) of Indian components for use overseas in 2013, compared with 75 million euros this year, Sudhir Rao, chief operating officer of the company’s Indian unit, said in an interview in Mumbai yesterday. Last year, the carmaker bought 10 million euros’ worth, he said.

Nissan Motor Co., Fiat SpA and Ford Motor Co. also plan to use more India-made parts overseas to benefit from costs that Rao said are as much as 15 percent lower. Renault is also preparing to build cars in India on its own after scrapping a venture with Mahindra & Mahindra Ltd. because of tumbling sales.

“You are building relationships with the suppliers which will help in future when your own production starts.” said Deepesh Rathore, a New Delhi-based analyst at IHS Global Insight Inc. “This is very important for any company entering the Indian market.”

Renault, France’s second-biggest carmaker, will ship the India-made parts to factories in countries including Romania, Turkey and South Africa, Rao said. Affiliate Nissan will buy $40 million of parts from India in 2012, Kiminobu Tokuyama, head of the Japanese automaker’s local unit, said in March. Nationwide parts exports grew 10-fold in the past decade to an estimated $3.8 billion in the year ended March 2009, according to the Automotive Component Manufacturers Association of India.

India Sales

In India, Renault will introduce the Fluence sedan by the middle of next year, followed by the Koleos and three other models by the end of 2013. The Boulogne-Billancourt, France-based carmaker is going it alone after sales of the no-frills Logan made with Mahindra fell amid surging industrywide growth. That history may hinder Renault’s new sales push, said Rathore.

“It’s not going to be a cakewalk as the Logan will have a rub-off effect,” he said. “But if they can convince people that this is Renault’s big India plan, then they have a good chance.”

Renault aims to sell as many as 60,000 vehicles annually in India by 2013, Rao said. It will compete with Maruti Suzuki India Ltd., which accounts for half of the nation’s auto sales, second-ranked Hyundai Motor Co. and Volkswagen AG.

To support it sales goal, Renault is building a factory in Chennai with Nissan and developing its own dealer network. The carmaker intends to have 30 showrooms, predominately in the nation’s seven largest cities, by the beginning of 2012, Rao said. It then plans to add 30 more each year.

“We have no illusion about what it takes in this market,” Rao said. “The established players are very strong.”

To contact the reporter on this story: Vipin V. Nair in Mumbai at Vnair12@bloomberg.net.

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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