Renault developed the Dacia Logan. In North Africa and central Europe, the model will be sold under the Dacia brand, the Romanian state-owned car company in which Renault acquired a controlling stake for $50 million in 1999. In countries like Russia, the model will be sold for $9.800 to $12.250 and will be sold under the name and insignia of Renault. Production of the Logan has already begun in Romania where it goes on sale in September. Further economies will come from the expansion of Logan into new markets like China.
PARIS -- Renault's latest car comes without power steering, antilock brakes or electric windows. There's no air conditioning either, and if you want music while you drive you'll probably have to sing it yourself.
But with prices starting at $6,100, the French car maker hopes its new "Logan," unveiled Wednesday, will take pole position in emerging markets where the car sector is growing fastest.
Analysts remain divided over whether Renault can make money on its new no-frills sedan, or whether it could just end up driving the group's brand down-market.
By introducing itself to fast-growing markets as the maker of the Logan, said Gaetan Toulemonde of Deutsche Bank Securities, Renault could be harming its prospects further down the line when the same consumers get wealthier.
"If you get a reputation for making cars that are reliable but a bit cheap, it may be difficult to sell more upscale vehicles later on," Toulemonde said.
In North Africa and central Europe, the Logan will be sold under the Dacia brand -- the Romanian state-owned car company in which Renault acquired a controlling stake for $50 million in 1999.
In countries such as Russia, where the Logan will be priced in the $9,800-$12,250 bracket, the car will be sold under Renault's own name and insignia.
The car has been designed with a critical one inch of extra ground clearance to cope with potholed roads and dirt tracks. Specifications for each target country have not been finalized, but Renault said power steering, air conditioning and stereos will not be included with the cheapest models.
Although Renault said it currently has no plans to market the Logan in western Europe or the United States, Renault chairman Louis Schweitzer said he could not rule out its eventual introduction in developed countries.
But branding is a longer-term concern, Toulemonde added.
"The big question is whether people will prefer to buy a brand new Logan or a second-hand (Renault) Megane or Volkswagen Golf."
Renault is betting that by 2010, some 700,000 customers will be opting for new Logans every year, mainly in Eastern and Central Europe, Russia, the Middle East, Latin America and North Africa.
"Potential buyers belong to a gradually emerging middle-class that will be the automobile market's chief source of future growth," the company said in a statement.
Renault's sales rose 11 percent to $11.83 billion in the first quarter of 2004, helped by strong demand in Turkey, eastern Europe and Russia.
Production of the Logan has already begun in Romania, where it goes on sale in September. Later, it will also be built in Russia, Morocco, Colombia and Iran.
For all its simplicity, however, even the most basic Logan boasts a 1.4-litre Renault engine, five full-sized seats, a large trunk and the same five-speed gearbox as the much pricier Megane II and Laguna II models.
"They'll have to sell many, many cars to make a profit out of it," said Jeremie Papin, a London-based analyst for Lehman Brothers.
Many observers voiced skepticism about the 5 percent operating margin Renault is widely reported to be seeking from its cheapest car -- which retails at about half the price of a similar bottom-end model in western Europe. Renault has forecast a margin of 4.5 percent for the group as a whole this year.
But the company stresses that cheaper labor and reduced component costs -- the Logan is built mainly from parts designed for older Renault models -- will help deliver the profitability it is looking for.
Further economies will come from the Logan's expansion into new markets like China, which Schweitzer said Wednesday would make a "significant contribution" to the project.
Schweitzer said Renault planned to market the Logan under its own brand in China, but added that the strategy had yet to win the approval of the Chinese government.
Renault spokeswoman Violaine Morel declined to give any profitability forecast for the new model.
But she added: "We're going to make money with this car -- we're not going to sell it at a loss."
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