Can Renault Kwid wean Indian car buyers away from Maruti?

Last month, "Kwid", French car maker Renault's most audacious small car ever, achieved something improbable. Its sales zoomed perilously close to five digits, at 9,743 units, helping it break into the top five bestselling cars in the country in March. This is the highest-ever sales for a European car in India in a month and more importantly, in doing so, Kwid raced ahead of every other car that is not a Maruti.

The largest-selling mini car at the entry level segment in India is the Maruti Alto and its position has been unchallenged and undisputed for 12 years now. Some others that have tried, including Chevrolet Spark, Hyundai Eon and most notably Tata Nano, have failed with varied levels of miserability.

Now that Kwid is nearing a sales mark of 10,000 units - a target it should be able to breach and maintain given that Renault's factory in the outskirts of Chennai is now belting out cars round the clock - it is by far the most credible challenger to Alto.

Also read: Why supercars are killing machines on Indian roads

Not that it would be able to upstage it - Maruti's 1,800 dealers to Renault's 206 itself makes a huge difference - but the drubbing Hyundai Eon has got at the hands of the Kwid should humble the South Korean car maker flying high on the triple successes of Grand i10, Elite i20 and Creta.

So what does the Kwid's success mean and who should get the credit for it?

Carlos is the man

It is said that "success has many fathers but failure is an orphan". So there will be many takers for the Kwid's runaway stardom. Even though it may sound like a cliche, but Carlos Ghosn, CEO of the Franco-Japanese Renault-Nissan alliance for a little over a decade now, should get bulk of the credit. Ironically, this success has come on the back of at least two terrible failures. That makes it even more inspiring.

Ghosn's fascination for an ultra low-cost car that served the mobility aspirations of billions of people left out by the mainstream automobile industry, is quite old. When Ratan Tata announced his vision to make a Rs 1 lakh car in 2004, Ghosn was one of the first to back this vision and publicly support Tata. Most, including the Suzuki chairman, were not only sceptical but deep down, they were insecure as well.

Ghosn's belief in the potential of such a project ran deeper. Even before Nano was launched, he joined hands with Bajaj Auto to stage a rival. Renault-Nissan, given its background of making technologically advanced, futuristic and stylish cars, did not have the wherewithal to wholeheartedly adopt frugal engineering.

In hindsight, that tie up was foolhardy. The Pune-based company did not have the expertise to develop a car. In fact, Ghosn's idea for the project clashed with that of Bajaj Auto managing director Rajiv Bajaj from the very beginning. While Ghosn wanted a proper small car, Bajaj merely wanted a four-wheeled vehicle that would be an upgrade on three-wheelers in Third World economies. The quadricycle Qute, is what Bajaj had envisioned.

That did not deter Ghosn. He went ahead and charted out the revival of Nissan's sub brand Datsun. Again, the idea was to make a range of affordable cars for markets like India, Russia, Indonesia and South Africa. And yet again, the plan came a cropper.

The Datsun Go, the brand's first product, started its journey in India and was priced attractively between Rs 3.1-4.5 lakh but was crippled by such bland styling and low equipment levels - it did not have airbags even as an option - that consumers gave it a miss. The message: people want an affordable car but not a cheap one.

Given the two failures, Kwid would not even be envisaged by any other company.

Sample this. General Motors had once tried to make a car smaller and cheaper than the Spark but gave up midway when it appeared keeping the cost down would mean taking a huge hit on the bottom line. Ditto for Toyota and Honda that at one time promised to barge into Maruti's bastion but gave up following the lukewarm responses to the Etios Liva and Brio respectively.

German auto giant Volkswagen also tried with a feasibility study of its Up! mini car for India but lost interest after it saw how Tata Nano bombed. Everybody thought India did not want a low-cost car anymore and even if they did, they would prefer a Maruti. Ghosn disagreed, but learnt his lessons and moved on.

"I think if you really want to be successful in India, you need to make the platform in India. Obviously, you can bring a car from outside and do a lot of things, but if you want to be successful in India, it has to have its genes here, which means the platform will have to be built in India from the beginning," Ghosn told me after unveiling the Kwid last year and in response to lessons learnt from the Datsun's failure.

"That’s why I am expecting that the Kwid will do much better than any other car because it has Indian genes. We don’t have any other car in Renault and Nissan with this level of localisation, which means that most of the suppliers are Indian. You are exchanging and working on a daily basis with them to make changes and evolution in the product," he added.

It needs some conviction to stick to an idea in the face of odds. Had Kwid flopped like the Datsun Go, Ghosn would have recieved much flak and would have surely been branded arrogant and inflexible. He should now be lauded for its success as well.

Gerard Detourbet's genius

The Kwid owes its success as much to Ghosn for believing in the project, as to Gerard Detourbet for executing it with panache. The mild-mannered former mathematics teacher had been with Renault for 45 years and his exploits within the group included Dacia Logan, Duster and Lodgy. Dont judge the impact of the cars by their success or the lack of it in India. Logan has been a stupendous success in eastern Europe.

Detourbet's eye for detail and ability to meet deadlines and a stringent budget consideration meant he was the obvious choice to head the project for developing the Kwid. Between meeting prospective customers that included those who had a car like an Alto, or those who were on mobikes like Splendor or Passion and wanted to buy a car someday, and Indian suppliers who had a remarkable reputation of not trying something out of the box, Detourbet quickly knew what the car ought to be like.

"It was clear to me from the start what sort of a car would click in India. A car is not a utility here. It is an aspiration. Like a statement to the society that I am doing well in life now. So while price is the big factor, the car should not look cheap," Detourbet told me at the time of the launch.

"Also there is this huge fixation for a high-bodied SUV-looking vehicle. It's not only in India, but Brazil, Indonesia, Australia, Europe, US, China... everywhere consumers want these small, compact SUVs. So we thought, let's give it a look of an SUV. An edgy upright stance."

Sales of over 40,000 units in six months and a waiting list stretching up to five months is proof of how right Detourbet has been. The Kwid has come as a life-saving drug for Renault India. Just a year ago, the company was reeling under the colossal failure of its seven-seater MPV Lodgy and getting to terms with the fact that the glory days of the Duster, its blockbuster SUV, were over. It had already missed its initial target of achieving 1,00,000 unit sales by end-2013 by a huge margin. In 2014-'15, its sales were a mere 42,955 units.

Not surprisingly, its dealers were fretting over a lack of business: the factory was running dry and profitability had nosedived to such an extent that the company was contemplating stringent cost-cutting measures. The impact of the Kwid has been such that the company is now talking about advancing its targets.

"We had announced that we will garner a market share of five per cent by end of 2017, but will achieve this by the end of 2016,” says Sumit Sawhney, the CEO and MD, Renault India.

Sawhney has much to thank Detourbet for.

If Kwid can, others can too

Ask any company official from a car company in India and he will tell you how difficult it is to establish a foothold here. You can bring in a contemporary looking, high-quality car like the Eon with the backing of a company like Hyundai and still it may not do well.

You may want to utilise the technological prowess of German engineering in a Volkswagen that should appeal to the upwardly mobile in the country and yet a Polo would return below average sales. Or you can pack it all in like Toyota in an Etios but that will still leave the consumer at large unimpressed. Nobody can say for sure what works here. The failure to compete with Maruti in its own game has left many bruised beyond reparation.

In that context, the Kwid lays the perfect template on how to crack a demanding entry level segment. And it should instil hope in others that they can do it too. When the car was launched at a starting price of Rs 2.53 lakh, it left the industry befuddled. It looked more premium than its price and already had the look of a winner.

"They cannot possibly price it so low and still make money," a senior R&D executive at Maruti told me on the day of the launch. "If you can tell me they are making money, then surely they have cut corners on quality. In a few months' time you will know which of the two is true."

It has been over six months now and the aspersions on both counts have been unfounded. The only complaints against the Kwid so far, have been on delayed delivery schedules. It is not really a high-quality product - anything that costs less than $10,000 cannot set benchmarks on quality - but in its segment, it matches everybody else. And offers more, in terms of space and equipment. Most of all, it has floored consumers with its exterior styling, a key element for the success of a car.

The list of failures means it is easier said than done when it comes to stumbling upon the perfect recipe of making a car. But what the Kwid shows is that it does not need to be only a Maruti to impress car buyers at the entry level. If a company as alien to Indian conditions as Renault can do it, surely a Honda, Toyota, Hyundai or Tata should be able to do it as well. Provided they give it a wholehearted try.

Speed breaker: Will redi-Go upset the applecart?

One perennial problem with Renault-Nissan in India has been its propensity to cross badge cars. From a Micra/Pulse, Sunny/Scala and Duster/Terrano, its has produced carbon copies of its cars in a bid to share the cost of development and hasten product lifecycles.

It is a routine phenomenon, one that Maruti has mastered. A Swift and Ritz compete with each other and so does a Wagon R and Celerio but all that Maruti wants is that the cusotmer should not go away to a Hyundai. In the case of Renault-Nissan however, it has never worked.

On April 14, Datsun tried to reignite its prospects in India by unveiling the redi-Go, a car that is cheaper than its existing dud Go hatchback. This is not a straight copy of the Kwid but there are similarities. The engine and transmission, for example, is the same.

More importantly, the pricing between Rs 2.5-3.5 lakh makes it a direct competitor of the Kwid. After the collective failure of the cross badging project, Ghosn had said Duster and Terrano would be the last of the cross badged cars in the group. Grapevine has it that the Kwid's success and Go's failure made Nissan very uncomfortable. Its a typical sibling rivalry.

Redi-Go is a project that was born after studying what went wrong with the Go and went right with the Kwid. It has also tried to exploit some of the Kwid's apparent weaknesses. Like the Kwid, the redi-Go has also raised a stance with a ground clearance of 185mm. To add a touch of premium, there are also LED daytime running lights on the front bumper. The interiors have also been upgraded a touch to capitalise on the Kwid's relative plasticky layout design.

Nissan in India is currently worse off than what Renault was before the Kwid came about. Datsun, in particular, has been a complete wash out. Before the roll out of the brand, the company hoped the Datsun would account for a third of every car it sells in India. So far, it accounts for more than half of it, but that is only because Nissan's own vehicles notch up such low numbers. Ironically, the Terrano is one of Nissan's better selling models in India.

There is a lot more juice left in the Kwid story. Renault showcased a one-litre engine version of the car at the Auto Expo in February and it should hit the roads within the next two months. Somewhere, it will coincide with the launch of the redi-Go. An automatic version is also on its way by the festive season this year.

Even then, the Kwid has to be wary of the redi-Go threat. If the latter ends up eating into Renault's territory, it would be very tragic. And definitely, it will not impress Ghosn.