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Renault, Mahindra venture faces hurdles -report

Source: Reuters - Wed 7th Oct 2009

French car maker Renault is looking to replace its Indian partner Mahindra & Mahindra in their struggling Logan joint venture, the Economic Times said on Wednesday, a report refuted by the French firm.

"Renault very strongly denies the rumour/speculation that there is any move to ask anyone, Bajaj Auto or otherwise, to take over the M&M stake in Mahindra Renault" the French carmaker said in a statement.

"Renault's commitment to the Indian market remains undiluted and we are continuing to work together with M&M to determine the appropriate product portfolio and the way forward for Mahindra Renault" it said.

The Economic Times, citing a source with direct knowledge of the matter, said the joint venture, in which M&M owns 51 percent, was struggling to sustain volumes due to uncompetitive pricing.

Mahindra is unhappy with the venture and is seeking greater control on product re-engineering, the newspaper said.

Data from the Society of Indian Automobile Manufacturers showed that Logan sales in the first five months of 2009/10 fell 68 percent from a year ago and production dropped 63 percent.

The newspaper said Mahindra Renault had failed to price the Logan competitively because of a 20-percent excise duty on the car that is more than 4 metres in length.

Duty on cars measuring up to 4 metres is 8 percent and Mahindra's demand to reduce the car's length was turned down by Renault, the paper said.

"I totally deny the way it has been reported. We are working at the moment on the way forward" Mahindra Renault's chief executive officer, Nalin Mehta, told Reuters.

"There are no plans to end the venture... at least nothing that I am aware of."

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