French automaker Renault, which had frozen its Chennai car project owing to the global slowdown, could now be compelled to revive it sooner than it expected to.

Nissan, its global ally, is incidentally, readying its own assembly line in the same plant for the launch of two sub-compact cars codenamed the X02A and X02B scheduled to debut in 2010 and 2011.

Top sources say Renault's decision could be prompted by its chief executive officer (who also heads Nissan), Mr Carlos Ghosn's assertion that the time had come to work on greater synergies with Nissan worldwide. A beginning will be made this year in Brazil and South Africa where there will be cross-production synergies between the two companies.

As for India, and specifically Chennai, Renault will have to think of an appropriate product from its own stable that can be built on the Nissan assembly line. How soon this can be done remains to be seen though it is emerging rather clearly that the plan will have to be put on the fast track now.

Small car market

Renault had planned to manufacture derivatives of the Logan sedan, now being assembled in Nashik, in an exclusive assembly line in the Chennai facility. These included the Steppe station-wagon and the Sandero hatchback. The company, subsequently, decided that the Sandero would be a better bet given the potential of India's small car market.

Once the Chennai plan was deferred, talks were held with its local partner, Mahindra & Mahindra to explore the option of rolling it out of Nashik. After all, the plant was lying underused because of the tepid market response to the Logan and it would have only made more sense to include another product like the Sandero. Nothing concrete emerged from the talks, and sources say the biggest stumbling block boiled down to the economics of manufacturing the small car.

Will Renault now look at manufacturing the Sandero on the Nissan assembly line in Chennai?

"This is not a decision that can be made overnight. The company will have to revisit its product portfolio, check out which of these would be appropriate for the country and will also fit in with the Nissan line. Most importantly, localisation will be the biggest concern in a price-sensitive market like India," sources said.

Global alliance

On Friday May 29th, Renault and Nissan announced plans to expand the scope of their global alliance. This would involve increasing their joint manufacturing operations and co-operate more on platforms, powertrains, vehicle engineering, logistics and R&D activities.

"Over the last decade, we used the alliance to develop win-win synergies between Renault and Nissan, and that approach worked well when both were profitable and growing.

Today, we have to move faster. Seeking synergies is no longer optional, but mandatory," Mr Ghosn said in the statement. Renault and Nissan are, of course, involved in another project in India with Bajaj Auto for the ULC (ultra low-cost) car scheduled to be launched from a plant near Pune in 2011.