Ashok Leyland-Nissan joint venture hits a rough patch

After almost eight years of marriage, the grand partnership between Ashok Leyland, the flagship company of the Hindujas, and the Japanese auto major Nissan Motor Company appears to have hit rocky roads with one issuing a legal notice, and the other serving termination intent for one of the joint venture firms.

Carlos Ghosn, CEO, Renault Nissan alliance and G.P. Hinduja, Chairman, Hinduja Group, at the unveiling of Ashok Leyland ‘Stile’ in Chennai in 2013. File photo

Nissan has sent a termination notice of the licence to the Nissan Ashok Leyland Technologies Pvt Ltd., a 50:50 technology joint venture between the two companies, citing delay in a bill payment of Rs.2.3 crore, according to the people in the know of the development.

It is also gleaned from highly-placed sources that another joint venture – Nissan Ashok Leyland Powertrain Pvt Ltd., a 51:49 entity between Nissan and Ashok Leyland, has held back supply of engines over trade dues.

The termination notice on the joint venture by Nissan comes even as Ashok Leyland has taken a Nissan venture to a district court in Tamil Nadu for using the manufacturing assets of a joint venture company for producing Nissan brand of cars instead of passenger vehicles developed and produced out of the joint venture.

When queried on the developments, a ranking official of Ashok Leyland, declined to comment stating that the matter was “sub-judice.”

The two firms had formed three joint ventures in 2008 mainly for light commercial vehicle business. The three are: Ashok Leyland Nissan Vehicles Pvt Ltd., Nissan Ashok Leyland Powertrain Pvt Ltd., and Nissan Ashok Leyland Technologies Pvt Ltd. The two partners had already invested about Rs.1,000 crore in these ventures.

Under an arrangement between the two partners, the Oragadam facility of Renault Nissan Alliance India Pvt. Ltd. (RNAIPL) was used to manufacture products for their joint venture company, Ashok Leyland Nissan Vehicles Ltd. This joint venture was importing parts under EPCG (Export Promotion Capital Goods) Scheme, which clearly specified their end-use. In this instance, these were to be used only to make products mentioned/made by the joint venture company. However, the Oragadam factory of Renault Nissan Alliance India Pvt. Ltd. (RNAIPL), it is alleged, had used these imported items to produce Nissan cars. When the officials of the Directorate General of Central Excise Intelligence inspected RNAIPL facility, they reportedly found the EPCG assets of the joint venture wrongly used for the production of Nissan’s other vehicles as well.

“Such action by RNAIPL is wrongful as it is without the permission of the Ashok Leyland Nissan Vehicles and also is in violation of the EPCG rules,” Ashok Leyland said in an affidavit filed before a district court. The Hinduja Group’s company has also sought to restrain Nissan from disposing off the items imported under the EPCG scheme.

The LCV joint venture between the two companies had mixed performance over these years. The passenger vehicle business that introduced two utility vehicles – Stile and Evalia – failed to meet the expectations.

But the goods business was showing good progress with robust sales coming from pick-up truck Dost and two trucks – Partner and MiTR.

“We are working with Ashok Leyland for a mutually agreeable solution. We have no further comments on the subject,” a Nissan spokesperson said.