Two years ago, as a former automotive industry professional and a keen observer of the sector, I had made a clear diagnosis of the reason that was adversely impacting Renault’s business and visibility in India.
After carefully studying and observing the company’s entry into the market, its selection of a partner, the product, advertising campaigns and finally the performance of its Logan in terms of sales, my conclusion had been that Renault suffered from a serious branding problem in India. And so when the company’s top India official was quoted in the Financial Express newspaper in early February this year, as saying “Building brand awareness and our image in the market will be our utmost priority now”, I was not surprised. Though this realisation has been late in coming as a lot of damage has already been done, it is better late than never for the company’s survival in India.
Having had the opportunity of working closely in building Indo-French linkages in the automotive sector and being associated with the visit of a French automotive delegation in the early 1990s, which included representation from Renault to study the market; it was heartening to know in early 2005 that the company had finally announced its plans to enter the passenger car market in a joint-venture with Mahindra and Mahindra (M&M).
Peugeot, as we all know, had a bitter experience in India earlier and its exit severely impacted the huge investments made by Indian vendors to the project as well as the buyers of its 309 car. When Renault announced its plans, I thought it would have surely looked closely at the mistakes that its rival in France had made in the Indian market.
However, from the beginning itself, signs were becoming evident that Renault’s foray would not be smooth. What went wrong?
The first mistake, to my mind, was that the awareness and product advertising campaign did not consider certain realities and did not possess a strategy of foresight – and even if it did, then it was not reflected in the final outcome. The Renault name, unlike iconic ones such as BMW or VW, was not known in India. Peugeot’s failure and exit had left a poor image, in the minds of both consumers as well as the automotive industry, about French auto makers in general. M&M, on the other hand, was primarily known as a tractor and utility vehicle maker and its brand recall in no way featured cars. Its core competence as a UV maker was ably demonstrated in its Scorpio.
Instead of first creatively and strategically trying to work on these issues through an awareness campaign, the advertisements ran headlong into selling the USPs of the product.
The second mistake made was in the choice of product itself. When the Logan was finally launched, its design was disappointing. Being a wide body car was fine but the overall design of the Logan was staid and not exciting. In a market which had already tasted contemporary technology in tastefully designed cars, the Logan, I felt, would not be able to sustain long-term demand due to a lack of appeal in the product. Initially there was a lot of excitement in how well the car was selling, but after about a year its sales started falling.
The third mistake was Renault’s own lack of initiative in sitting in the driver’s seat to quickly repair its branding in India. A yardstick to the branding problem was apparent in the way people would make a brand recall of the car. When referring to the Logan, people would invariably say “Mahindra Logan”. Apart from this, the cropping up of Renault’s name in other business ventures, such as its plans with Bajaj and with Nissan, was adding to the confusion in the minds of consumers and affecting the brand recall further.
In my opinion, Renault should have articulated its mind and plans in greater detail from the beginning itself, through the media or other ways. A messaging which would, among other things,
oSpell out Renault’s business plans for India and its elements in as much detail as
possible.
oConvey specific points on how India is important for Renault in its global plans.
oElaborate on Renault’s core competencies as a global company and the value it has
created through its partnerships in other emerging economies.
oExplain in what way Renault would bring value to other businesses in India, the
Indian people and the country.
In a scenario where auto demand in Europe is expected to fall further and with Renault SA having reported an annual loss, the French auto maker’s plans in emerging markets such as India will logically get priority in the hope that such markets sustain demand for its products and add to the company’s revenues in the future. The company has announced further investments in the country as well as the introduction of other car models.
However, Renault needs to act fast and take bold decisions to repair its branding in the country while moving with its new strategies and business plans. Though all these will have to move in tandem, working on an enhanced awareness and a clearer image will be paramount for the company if it wants to benefit faster in a market which is seeing the levels of competition grow along with the number of buyers who are increasingly becoming more discerning and sensitive about brand value.
(Published in Auto Monitor magazine's April 1, 2010 edition)
