The Renault-Nissan alliance may not have had a smooth ride so far, but the duo is on the fast lane to rapid acceleration
BY INDIRA RAO
When automobile giants, Renault and Nissan, came together to form an alliance, nobody could have predicted what lay in store, especially in the Indian context. Traditionally, when East and West meet, one of two things is bound to ensue: there could be complete mayhem or, in rare cases, seamless harmony. The Renault-Nissan alliance is a study in the latter: a blend of the best of both worlds.
“Nissan is a Japanese company and Renault is a French company. Their DNA is somewhat different, as a consequence. Nissan has been operating globally for a long time, whereas Renault’s production base has been more of France and Spain, until about 15 years ago. So you have got an Asian and a European culture,” explains Colin Macdonald, MD, plant, Renault Nissan Automotive India. However, he is quick to add that they are in a rather unique place too.
With India poised to become one of the top automobile markets globally, this is an ideal climate for the Renault-Nissan Alliance to be parked in the nation. And the company, realising this, has made India home to its largest alliance plant in the world. The Renault Nissan Automotive India Private Limited (RNAIPL) plant in Oragadam, Chennai, which began operations in 2010, has since become a strategic hub for production, R&D and exports for the alliance. Spread over an expansive space of 640 acres, the plant has an overall capacity to build 480,000 cars per year.
“We are the first plant that is owned by both companies with the sole purpose of building cars for both to be sold predominantly in India, in order to get into this big market, which is a fantastic opportunity for us. So, in this plant, we live in two worlds. The two organisations aren’t completely symmetrical; processes are different in both,” says Macdonald.
What he means, in essence, is that the two companies don’t design cars in exactly the same way. The solution: a facility built with the capability to manufacture a Renault designed car as well as a Nissan designed car. Doesn’t this complicate processes, is the question that pops into my head. “I suppose you could also say that it gives us a little bit more flexibility,” says Macdonald. “We have tried to keep it as manual as possible, with the care point for us being our training. Our staff is trained to deal with our complexity, because we are building five models down one line and four models down another. We have an aligned production. This is how we build cars in the alliance, and that is standardised across both companies. Previously, there was the Nissan production way and there was a Renault way. Both companies have come together now. What we have today, we didn’t have 10 years ago. It comes from our alliance organisations, which are trying to converge on the best practices.”
But the jugalbandi is not limited to production alone. Even the engineering teams work in tandem. “We are looking at each of our processes, from stamping to the final assembly – and trying to find the best way, in terms of quality, cost and time. Gradually, in the next three-five years, you will see that convergence taking place as we introduce the next new model or the next new engine. And that is absolutely what the alliance is about. It is about creating synergy by doing things together, creating benchmarks, finding the best practices and improving on quality costs or delivery timings, as a consequence,” adds Macdonald. The best example of this is how the company uses petrol engines designed by Nissan and diesel engines designed by Renault in both cars.
The Renault-Nissan plant is also a classic example of leveraging India’s manufacturing capabilities. The company has manufactured and exported more than 500,000 cars from the Chennai plant to 104 countries globally, including Africa, Middle East, Europe and the Caribbean region.
In fact, it was the first automobile brand to use the Ennore Port as an export gateway in 2010. From then on, Nissan has consistently achieved one lakh export units per year, with the Nissan Micra having the distinction of being the largest – in terms of volume – exported car from India in 2014. The Micra has, of course, proved to be a long standing success for Nissan. It was the first Nissan car to use CVT engine, a technology developed to try and counteract the kind of jump that happens in a normal automatic transmission when it changes from one gear to another.
Since it first hit the market, the car has gone through several evolutions, all the while proving to be popular globally. Solid, cheap to run, reliable, comfortable and with a decent ride handling, it is obvious to anyone why it is apt for the Indian market. In addition, every year about 75,000 cars are exported from India.
The Chennai plant has become a unique test bed for skill sharing. Teams from a range of cultures pool their expertise, working side-by-side on Renault and Nissan projects. Manufacturing cars such as the Duster, Lodgy and Scala for Renault and Terrano, Micra and Sunny for Nissan, the plant currently makes 800 cars a day via two operational lines. It provides direct and indirect employment to over 40,000 people. In addition, it has created a global sourcing hub procuring parts from over 150 Tamil Nadu suppliers.
“We have supplier parks beside us. You want to avoid having some of the big, expensive parts moved across large distances. Hence, you bring your suppliers close to you, so that they are building in line with the production plan. In addition to that, you are moving the cars less – lesser the parts, lesser the kilometres. So it makes it easier to deliver the parts at a much cheaper cost,” says Macdonald.
Although they use the same materials as others, the plant recycles plastic for their bumpers. Similarly, in the machining area, residual elements like chips are recycled. Even parts from local and overseas suppliers arrive in reusable packaging. Not only is this an eco-friendly practice, it also results in big savings.
Another big feature is the R&D centre. Not only does it work for products that are built in India, but also those built all over the world, and for both companies. From the first ideation of a car in a designer’s mind to the development of concept sheets, drawings, images and ultimately the evolution of a clay model, the company follows an old-fashioned process. There is a shifting endeavour towards common platforms, such as the basic chassis of the car being reused and shared across platforms between Renault and Nissan. This results in reduced tooling and component costs, saved time, and increased efficiency. Alternatively, CAD drawings and digital designing software are used to see how the car will be assembled, the sequence of assembly, etc. That whole process, depending on whether it’s about modifying an existing model by way of a facelift or upgrade, or starting from scratch, will take anything from three-five years. That’s a long journey, to say the least. But an exciting one too.
A case in point is the Renault Kwid, which goes into production in the next month or so. The Kwid, as a project, started around five years ago. It took long, because it required a brand new platform, since nothing similar existed anywhere in the world. “In comparison, the Lodgy was an existing car, already designed and in production at the Tangier plant in North Africa. So that’s kind of a copy and paste, with some local modifications to attune the car to the Indian market, because people in India have slightly different preferences and tastes than in Europe,” offers Macdonald.
But customisation for the growing Indian market is starting to come into play in a big way now. Unlike earlier models that made do with mere tweaks before they were presented to Indian consumers, the Kwid is being designed entirely for the local market. “On the Nissan side, I think we are now discovering a little bit that the Indian customer and our perception of the Indian customer are not necessarily the same thing. I think they want the same functionality: electric windows, aircon, power steering and ABS. The Indian customer wants to enjoy all of these things. Why shouldn’t they?” quips Macdonald.
That then brings us to the one factor that is easily ignored in India. Safety. Although Indian legislation is not as demanding as in other countries, the company prefers erring on the side of caution by sticking closer to European standards rather than average Indian legal requirements. This extends to the plant, where a special safety team ensures a safe working environment, including briefings for contractors visiting the site. However, some things are still done the old way. Using the advantage of low labour costs in India, the company is low on automation, with only about 14-18% of spot welding left to robots.
Although the original plan was that 60% of the product volume will be sold in the domestic market and 40% exported, it has turned out that local sales have been sluggish. “We didn’t establish ourselves as well as we expected. As a result, 60% of what we build is exported and 40% is consumed in India. That just explains the difficulty of coming into any market as a newcomer in the car industry,” says Macdonald.
Clearly, finding a place in the hearts of Indian consumers is proving to be the biggest challenge for both brands. The duo have only been able to capture a 1.5% market share so far. Having said that, efforts are on to expand their dealership network. Increased advertising, getting familiar with the customer and driving more people to their showrooms and into their cars is the immediate task at hand. It’s an uphill climb for sure, but the alliance seems prepared to strive hard. With special versions of their cars, like the Terrano Groove, set for launch and new cars in the pipeline, there is sure to be enough rolling out of this massive plant to keep Indian audiences interested. Converting that interest into sales and sustaining it over time, especially in the domestic scenario, is what will drive the alliance to the next level.