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Last Updated: Wednesday, 7 March 2007, 21:04 GMT
Renault accelerates in cheap car race
By Hugh Pym
Business Correspondent, BBC News, Romania

A Logan estate
Renault wants to produce 350,000 of the Logans a year by 2008

The pressures facing major car manufacturers just keep on building.

Companies are having to look over their shoulders at the fast growing car industries in India and China.

And as climate change tops the agenda, the demands for greener, cleaner vehicles is intensifying.

Over the new few years, a wave of cheaper mass market cars heading for Europe and North America is anticipated by analysts.

But one established car maker appears to be ahead of the game, coming up with its own low cost model to try and compete with cheaper vehicles.

Big hit

Renault's links with Romania go back forty years, and cars were made at the Dacia plant under licence until the French company took it over in 1999.

The threat of imports from India and China is very obvious
Rob Golding
Car analyst

When it began making its new model, the four-door Logan saloon, it was only intended for the local market.

But Renault was stunned when it proved to be a big hit in France and Germany, helped by a price tag equivalent to 5,000.

Renault has big plans for Dacia, the Romanian carmaker it wants to turn into a world beater.

The company had stumbled on a new market - drivers who had rarely if ever bought a new car and who traditionally settled for a second-hand motor.

In the last few weeks an estate car version of the Logan has been launched, capable of carrying up to seven people.

It retails for about 6,000 and already a waiting list of French and German customers has built up.

Workers at the Dacia factory
Staff are paid one eighth of the salary of French Renault workers

There are no frills and the interior is basic.

But the cars come with airbags and advanced braking systems in line with EU safety regulations .

Hush-hush

The Dacia factory employs nearly 11,000 workers, many of them highly-skilled.

The production process is low tech and simple and output is accelerating from 200,000 in 2006 to a planned 350,000 in 2008.

The key to the lower costs is, quite simply, lower wages.

A Romanian car worker will take home the equivalent of 170 a month - an eighth of what their French counterpart earns.

Buoyed by their success, three more new models are being planned under high secrecy at the plant. It's so hush-hush that we were not allowed into the assembly area.

Renault has stolen a march on its rivals but others are trying to catch up.

Toyota said it was carrying out a detailed study into the potential of the budget car market.

But looming in the distance are China and India - their car manufacturers are gearing up for a big push into North America and Europe.

A car-carrier leaving the Dacia plant
Renault wants to produce 350,000 of the Logans a year by 2008

And Rob Golding, an independent car analyst, says this amounts to a potential threat to Europe's high volume car industry.

"The threat of imports from India and China is very obvious," he said.

"The way those manufacturers who are going to feel the heat are protecting themselves is making the product cheaper and cheaper".

That amounts to good news for consumers but potentially bad news for car makers.

Renault is one which hopes that it can ride the low cost wave and still make money out of it.


SEE ALSO
Renault to expand Indian venture
09 Nov 06 |  Business
Renault launches 5,000 euro car
02 Jun 04 |  Business



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