Slump hits India's car industry

[sajiv]

Carmakers Nissan and Renault have scaled down plans for joint projects in India after a sharp fall in car sales in the region.

Nissan, which is reviewing its current expansion strategy, said it would cut investments to improve cash flow.

The two partners plan to open several local factories in partnership with Indian manufacturers.

But Nissan has warned that it will reduce or delay production in some plants to meet falling demand.

Japan's third-largest carmaker said it still wanted to start car production together with Renault in the first half of 2010, as scheduled, at a plant in the southern city of Chennai.

But the factory, which is expected to reach full capacity of 400,000 cars per year by 2015, will start with just one daily shift, instead of two.

Sales fall

Other projects in India, including a joint venture between Nissan, Renault and India's Bajaj Auto to sell a $2,500 (£1,700) car from 2011, would go ahead as planned, Nissan said.

The company added that it would delay truck production by six months at its joint venture with India's Ashok Leyland.

Falling truck sales made the delay sensible, said the company's spokesman.

Demand for trucks in India has dropped by more than 60% over the past year because of the credit crunch and a sharp drop in construction activity.

Most of the local auto companies have temporarily closed plants in order to avoid building up unsold stock.