In 2006, Carlos Ghosn, the CEO of the Renault-Nissan
Alliance coined the term “frugal engineering” by which he meant achieving more with fewer resources. Carlos Ghosn was referring to unique ability of engineers in India to
innovate cost-effectively and at a faster pace when faced by severe resource
constraints. As Ghosn said, “In the West, when we face huge problems and we
lack resources, we tend to give up (too) easily. Jugaad is about never giving
up!” Renault-Nissan has successfully adopted frugal engineering and the fundamentally
jugaad mindset—and turnaround itself into a major global manufacturer of both
low-cost vehicles as well as electric cars—two of the fastest growing segments
in the global automotive market. According to Wikipedia, in India, the words "Gandhian" or "jugaad",
Hindi for a stop-gap solution, are sometimes used instead of
"frugal". Other terms with allied meanings include "inclusive
innovation", "catalytic innovation", "reverse
innovation", and "BOP innovation", etc. Business organizations
across the globe are forced to offer products and services to frugal consumers
as the global business environment turns volatile due to the 2008 financial
crisis and the European Sovereign Debt crisis which led to businesses facing tough
conditions to maintain their sales and profitability.
|
Year
|
Dacia
|
Renault
|
|
2004
|
22,833
|
−
|
|
2005
|
135,184
|
9,915
|
|
2006
|
184,472
|
63,134
|
|
2007
|
230,294
|
136,742
|
|
2008
|
218,887
|
206,059
|
|
2009
|
160,120
|
150,603
|
|
2010
|
126,598
|
189,898
|
|
2011
|
95,365
|
253,698
|
|
2012
|
102,175
|
221,752
|
|
Total
|
1,275,928
|
1,231,801
|
In September 2004, Renault launched Logan, an affordable,
robust, and well-designed car with many
simplified features to keep costs down (has 50% fewer parts than a high-end
Renault vehicle and has a limited number of electronic devices) and priced at 5,000 euros (Current retail price is US$10,000).
The Logan is based on the B0 platform used for the Renault Clio II and
for other Renault and Nissan models. The Logan's design lines are simple and
straight and cheaper to repair. Some parts are also much simpler than those of
its competitors like rear-view mirrors are symmetrical and can be used on
either side of the car, the windshield is flatter than usual, and the dashboard
is a single injection-molded piece. The car was developed with a focus on
developing countries as the climatic and road conditions significantly vary
from the developed countries like strong and soft suspension, and height of the
chassis is high when compared to most other compact cars so that it can run
effectively on dirt roads and negotiate potholes on ill-maintained asphalt
roads. The engine is specially designed to handle lower quality fuel and the
air conditioning has to be powerful enough to lower the temperature by several
degrees (temperatures above 40 °C are common in the Middle East and the Mediterranean
Sea). Despite the fact the car was made exclusively for emerging markets, the Logan has become Renault’s cash cow and big success in recession-hit
European markets particularly in developed markets like France.
The Dacia Logan is a small family
car produced jointly by the French manufacturer Renault and its subsidiary
Dacia of Romania. It is manufactured at Dacia's automobile plant in Mioveni,
Romania, and in Colombia, Brazil, Russia, Morocco, Iran, India and South
Africa. It is also marketed as the Renault
Logan, Nissan Aprio, Mahindra Verito or Renault Tondar 90 depending on the
existing presence or positioning of the Renault brand, according to Wikipedia.
In India, the Logan was launched in 2007 and marketed as the Mahindra Renault
Logan. In April 2010, Mahindra &Mahindra ended the joint venture when it
bought Renault's 49% share and according to the deal Logan would be marketed
with the Mahindra-Renault logo until the end of March 2011. Mahindra retained
the rights to produce and sell the Logan under its own name of Mahindra Verito with minor alterations
to the front but retaining Renault petrol and diesel engines. The car is sold
as the Dacia Logan in the
markets where Renault has presence, such as European, African and Asian
countries (i.e. Romania, France, Italy, Belgium, Netherlands, Germany, Greece,
Hungary, Poland, Serbia, Czech Republic, Croatia, Slovenia, Morocco, Turkey and
many others) and marketed as the Renault
Logan in South Africa, Argentina, Russia, Ukraine, Colombia, Ecuador,
Israel, Egypt, Brazil, Chile, Perú and Venezuela.
The Renault group is continuing its focus on improving the Dacia Logan
range of passenger cars and the company revealed the second generation Dacia
Logan in 2012 Paris Auto Show. Dacia Logan has a more modern shape with
flowing lines that confer an elegant appearance while retaining the
conventional styling that is its strength. The new front face,
designed around Dacia’s new styling identity, suggests quality and strength.
The Dacia logo on the grill and the broad headlamps make for a more expressive
front end. The perceived quality of the previous generation has been enhanced
through the choice of materials and improved fit and finish. This model features a new dashboard with an updated appearance (including
chrome dial surrounds) and more ergonomic controls. Dacia Logan is built at the
plants in Pitesti (Romania) and Casablanca (Morocco), both of which are ISO
14001 certified. In France,
prices for New Dacia Logan start from €7,700 and come with a three-year/100,000km
warranty. Four engines will be available for New Dacia Logan from
launch, including the 1.2 16V 75 petrol power plant and the brand new TCe 90
petrol engine, which marks a significant saving in terms of fuel consumption
and CO2 emissions. (Source: www.renault.com )
Renault Group is keeping the price of the Dacia Logan cheap compared to its
competitors in some markets where in the cheapest version of the car is €5,900,
and the price can reach €11,200, depending on equipment and customs duty. (The
base model for Western Europe, where it is badged as a Dacia but generally sold
in Renault dealerships, is somewhat more expensive). For Renault group Dacia
Logan is a critical part of its revenue growth strategy particularly with a
focus on emerging markets as the developed markets are facing tough economic
conditions. Even customers in developed markets particularly in European region
are also looking to buy Logan as its price is low, easy to maintain and also
provides good comfort. Logan started as a no frills sedan focused majorly at
the emerging markets but it saw most of its success in developed markets where
customers received this car well. The car did not perform to the level of
expectations and the joint venture with Mahindra group ended in matter of three
years and the only car that came out of this joint venture is Logan. In other
emerging markets Logan was well received and Renault too has launched many
variants of Logan and also has launched an upgraded version at the end of 2012.
Logan is also a case where in over a period of time the frugal innovation of
low cost no frills version can also be supported by launching higher cost
versions of the base version. Customers would definitely buy the higher cost
variants also as evident in the Logan case. Also the portfolio of offerings can
also be expanded by launching various other types of vehicles like in the case
of Logan there are Light Commercial Vehicles, Sports Utility Vehicles, Vans, and
Pick-up trucks along with base version low cost sedans.
Discussion points:
1. How important is Renault/Dacia Logan for the growth of Renault group?
2. What should Renault do to increase sales further in emerging markets?
3. How effective has been the Dacia Logan Product strategy?
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