Renault-Nissan plant in Chennai goes flat out

As CEO and Managing Director of Renault Nissan Automotive India, Colin MacDonald has reasons to be euphoric.

The Chennai plant wrapped up 2016-17 with its highest ever annual output of 3.17 lakh units, up 40 per cent from 2.26 lakh units in the preceding year. The other bit of good news came from Nissan which sold an all-time record high of of 58,000 units.

Hence, when MacDonald exults that it was a “super year”, he is spot on.

Leading the charge were Renault’s Kwid and Nissan’s redi-GO. “We had a huge order backlog on these two products and operated three shifts in Line 2 from March last year,” he says. “This helped us catch up with the levels of demand which we had been waiting for so long.”

With the waiting period for the two models now in check, the factory has moved back to the two shift system from December 2016 as part of the production optimisation plans for cost savings. The optimal capacity right now is 4.8 lakh units annually.

“We have a lot of new models coming across the three brands – Nissan, Datsun and Renault – in the coming months,” says MacDonald. “I would expect us to cross four lakh units by 2019-2020, which is again a conservative estimate.”

The growth momentum for redi-GO is expected to continue through the first quarter of this fiscal while some refreshes/facelifts from Renault and Nissan will keep the momentum going through the year. These two models alone involved roping in nearly 40 suppliers, which means the tally today is close to 300. “It is a huge number to manage,” admits MacDonald.

Of course, another important area is costs where a lot of work is being done. This is imperative for Renault-Nissan to stay competitive in a market like India where Maruti and Hyundai are the two big players. “I keep telling people that if everyone wants a pay raise of 10 or 12 per cent every year, it will become too expensive without a cost focus. If we don’t control costs, we will lose our competitiveness,” cautions MacDonald. This also goes in line with the frugal engineering mantra off Carlos Ghosn, the Chairman of Renault-Nissan.

The Chennai plant is among the top three in the country when it comes to efficient manufacturing process in terms of power usage. A lot was done to get the basics right over the last 12-15 months while best practices were reinforced to build quality cars. The other priority was to ensure that defects were fixed quickly through standardised operations.

Last year, Renault-Nissan hired 60 additional engineers at the plant to help in the areas of productivity as well as in fixing chronic defects. “We put that extra engineering talent in place to accelerate improvements in manufacturing,” says MacDonald.

According to him, it takes a lot of effort to establish a brand in a competitive market like India. “The lifecycle management for cars in this country has to be stronger than the rest of the world,” says the CEO. “I think Renault understood it well. Now Nissan has also learnt it.”

It has, in fact, been a huge transformation journey for Nissan over the last three years when it had to rebuild a dealer network and hire a lot of key people. The revival process was slow and after the tepid market response to the first two Datsun offerings, it looked as if Nissan was in for a tour haul ahead. However, the redi-GO has helped improve visibility and the company seems to have finally hit the sweet spot in the market.

From the Renault-Nissan alliance point of view, the ramping up of capacity at the Chennai plant is more than welcome news. India was the first country to establish a joint manufacturing base between these two global allies. It made sense to have synergies at the back end even while the brands would compete fiercely at the retail end.

Renault has perhaps been more successful with the Duster and, more recently, Kwid, which is more of a mass product and has given Maruti Alto a run for its money in the compact category. Nissan, on the other hand, has just not made a strong customer connect with products like the Micra. Still the entry-level strategy in the form of Datsun has helped to an extent. Even here, the wait has been for over two years till the redi-GO made a mark.

Going forward, Nissan is now clear that it needs to redraw its retail strategy where Datsun will be part of the mass brand intended for smaller cities and towns. Nissan will represent a top-class premium alternative with the best to offer in technology. Whether this will eventually result in separate showrooms for the two brands in the coming years remains to be seen.

Eventually, Nissan will hope that all these efforts will help it get a five per cent market share in India, which was the intended goal for 2016. Renault has been on a stronger wicket thanks to Kwid but would like to see stronger numbers for its Duster, which was once the monarch of the SUV segment till competition came along.