French car brand Renault entered India a few years ago through a joint venture with Mahindra & Mahindra. But the alliance broke up, and Renault chose to go alone. A pioneer in making multi-utility vehicles (MPVs) in Europe, it created a storm in the Indian market with the launch of its compact SUV Duster in July 2012. No other car in the recent years had created the kind of excitement Duster did.
After this, every auto maker started to focus on launching a compact SUV. Though Renault is relatively a new brand in the Indian car market, it seeks to grow faster and transform into a volume player here. Sumit Sawhney , Country CEO and Managing Director, Renault India, spoke to The Hindu on company’s ambitious plans. Excerpts:
There wasn’t any major product launch from Renault India in 2014. How was the calendar year for your company?
If you look at the Indian automobile industry in 2014, it was a mixed bag - we saw a few good months where the industry recorded positive growth and a few challenging months with negative sales trends. While the overall environment was challenging, we saw that new car launches had a positive rub-off on sales. Companies who introduced strong new products were ahead of the curve. Manufacturers that stood out showcased that a challenging business environment provides the opportunity to innovate and still be successful. We are the youngest auto brand in the country. So, to launch a new product is slightly a longer process. But in spite of that, Renault maintained its track record in 2014 of being the number one European brand, and the ninth largest carmaker in India, which it achieved in 2013, after just three years of operations in the market. I would call 2014 ‘the year of consolidation’ for Renault India.
But, has Renault as a car brand arrived in India?
Renault has established its credibility by Duster and also by other products. Be it in quality or customer satisfaction, we are right there among the top. Customers are happy with our products and service. Now, we just have to ramp that up gradually. We have a clear long-term plan for the Indian market. Renault is very serious about India. So, to succeed in a country like India one needs to have a strong distribution network and manufacturing base. While product-wise we are geared up, we are also ramping up our network. Today, we have an alliance plant at Oragadam that has capacity to build more than 480,000 cars a year. We also have a technology centre in Chennai that has over 4,800 people who are working for future technologies. There are auto brands in this country for over 10 years and their volumes are not very high. But for a brand which is 3-year old, our progress is good, and we have definitely arrived.
What will be Renault’s strategy for the Indian market? Will you aim for niche or volume play?
During our journey over the last three years, we have rapidly expanded our presence both geographically as well as with swift product introductions – we launched five new products in quick succession. We are entering the growth and volume drivers of the Indian automobile industry. Renault has a clear-cut plan chartered not only for 2015, but we are looking at a long-term horizon and working on our product strategy for 2016 onwards as well. So, we continue to work towards our goals of leveraging our position of being the number 1 European brand in India, achieving a five per cent market share and becoming one of the top 3 international brands in India in terms of sales and customer satisfaction.
What will be your focus areas in 2015, and how many new products are to be launched during the year?
As a company, we closed 2014 with a market share of about two per cent. Our immediate goal is to increase the share to 5 per cent by next year. As part of this objective, we will be introducing two new products in 2015 — the Renault Lodgy in the MPV segment and a compact hatch. With the launch of the Renault Lodgy, we plan to offer customers a unique value proposition and create a niche in the segment, like we did with the Duster. We will also be launching a mini-car, priced less than Rs.4 lakh. Both will be our volume drivers. One of our key focus areas alongside our aggressive product launch strategy is to keep growing our sales and service outlets. We have already grown our network. . We plan to further expand our facilities next year, which will be one of the fastest ramp-ups by an auto manufacturer in India. As of now, we have 157 outlets and we intend to increase the network to 205 plus outlets by the end of this year. We are looking to increase our presence in the tier II-IV markets. Our product launches have been strategically planned to meet this objective.
Entry-level car segment is still under stress. Will that affect your mini-car gameplan?
The entry-level still remains the biggest segment in the country. About 38-40 per cent of sales are in this category. So, I don’t think there can be any wrong time to enter this. Secondly, we are seeing a lot of improvement. Today, sentiments are positive. Till recently, India was having a politico-economic challenge situation. Political part has been taken care. Economic challenge is also under control. Mini segment had stress because interest went up drastically, fuel price also shot up. Most of the middle class people had floating housing loan. If EMI goes by Rs.2000-5000, fuel bill by Rs.1500 and food inflation eats away another Rs.1000-2000. So, Rs.6000-7000 rise per month has had a negative impact.
However, we have started seeing trends towards job creation, especially for entry-level professionals. Second good news is the declining fuel price. All the economic indicators are positive. Inflation (retail) is very much under control. We clearly see that the interest rates will also come down. It is matter of a few months that we will start seeing that. My estimate is that after the end of Q1 of 2015 – the two big this country is looking forward to which in my personal belief are going to be breakthrough. First, implementation of GST will at least give a boost of 0.6 or 0.8 per cent on GDP.
The second big event could be the union budget of 2015, which will clearly give right sense of direction. Also, I think by the end of Q1 of 2015, a lot of infrastructure projects will see action on the ground level. So, I think H2 will be a strong period for India. I don’t see any reason why Indian economy and auto industry should face challenge. For Renault, though mini-segment is a big pie, we have not seen big launches in the last two years. But we are seeing very interesting trend where any launch in new segment is getting good response.
We gather that you are also aggressively looking at pre-owned car space. What are your plans?
We are also constantly evaluating innovative growth avenues and novel services to achieve our business objectives, and the pre-owned car business is one such avenue. The pre-owned car business is estimated to be significantly bigger than the new-car market, and is growing at a faster rate. A lot of customers who are buying cars today already own a car, and are seeking an optimal exchange platform to get the right value for their existing vehicle. Today, consumers in India have awoken up to the positive value proposition of pre-owned cars.
Pre-owned cars give higher flexibility and reach to prospective car owners, whether first-time buyers or repeat buyers, due to the price advantage they offer. Key factors contributing to the increasing popularity of this business is the multitude of quality choices available coupled with an increase in income. All this has created a situation where people want to upgrade their vehicles more frequently.
The used car market in India is expected to grow by a CAGR of 20 percent in the next five years, with the organised sector playing a big role in this growth story. With the augmentation in our network, we believe it is the right moment for us to get into the pre-owned car space.
In the recent months, there has been heightened debate on enforcing better safety standards for cars sold in India. What are your views?
Safety is one of the key pillars of Renault, not only in India but across the globe. All our products meet safety requirements that are mandatory. It is encouraging to see a growing focus on better safety practices in India, and we will continue to offer customers the most enhanced safety features.