India's second largest two-wheeler manufacturer ,Bajaj Auto Limited has scrapped its plans of producing an ultra low cost small car in India for its foreign partners, French based Renault SA and Japanese automaker, Nissan Motor Co. The Indian firm cancelled its plans of foraying into the low cost car segment as it was found to be economically unfeasible. However, Bajaj will now concentrate its energies on the development of a low cost commercial vehicle instead of the planned mini car business.
Bajaj Auto had entered into an agreement in 2010 with the Renault -Nissan partnership for the production of a low cost mini car to be launched in India and other developing countries. The mini car business was expected be commissioned in 2012 and the car would have competed strongly against the world's cheapest car, Tata Nano.
For the planned car venture, Bajaj was to be responsible for the engineering and production of the car, while the foreign partners would have taken care of the marketing and distribution part in India and other emerging markets.
Europe's second largest car maker, Renault had said in June, that the ultra low cost segment was not on its priority list for its India operations. The company is targeting to boost its sale numbers in India to 90,000 to one lakh units by the year 2013.
The proposed low cost commercial vehicle would be Bajaj's first four wheeler vehicle and would be set up at the company's Aurangabad plant in Maharashtra. The total commercial vehicle segment posted a growth of 14.10 percent in Q1, 2011-12, compared with the same quarter last year. Utility vehicles and vans registered a year-on -year growth of 5.08 percent and 29.28 percent, respectively during the April-June quarter of 2011-12.
Money View: Bajaj Auto had come out with its result few days back. The result didn't match the expectation of the analysts and some investors. This led to hammering of the stock. Though it has not been reported but there is a possibility that the company shelved the project in order to concentrate on the two-wheelers.