Ashok Leyland Nissan joint venture seems to be doomed
DSIJ Intelligence / 17 Feb 2016
Ashok Leyland and Nissan Motor Company's joint venture appears to cease as Nissan issued a legal notice to the company over non-payment of royalty. Nissan Ashok Leyland Technologies had set up 50:50 technology joint ventures in year of 2008.
Ashok Leyland and Nissan Motor Company's joint venture appears to cease as Nissan issued a legal notice to the company over non-payment of royalty. Nissan Ashok Leyland Technologies had set up 50:50 technology joint ventures in year of 2008.
Both the companies had entered a three-way JV agreement for vehicle manufacturing; power train manufacturing; and engineering design & development of parts for both the partners under Ashok Leyland Nissan Vehicles; Nissan Ashok Leyland Powertrain; and Nissan Ashok Leyland Technologies respectively.
Ashok Leyland issued a legal notice to Nissan, warning the Japanese auto giant against using its equipment, installed at plant at Oragadam near Chennai, for making cars. The company claims that those equipments belonged to the company and have been put up for making only LCVs, not cars. However, as per Nissan India the usage of equipments was legally permissible.
According to media sources, Nissan decided to exit the joint venture as Ashok Leyland has not paid royalty, which amounts to more than Rs 200 crore. Earlier, Ashok Leyland manufactured four vehicle models through its partnership with Nissan viz. Dost, Mitr, Partner and Stile. On the other hand Nissan manufactured only Evalia through the partnership.
Nissan Ashok Leyland Technologies moved the Bureau of Industrial & Financial Regulation (BIFR), claiming that its net worth had been completely erased. On financial front, Ashok Leyland wrote off Rs 214 crore from the joint venture which reported a loss of Rs 791 crore in the last fiscal.
The share price of Ashok Leyland declined by 2.3 per cent on bourses in early trades; and is trading at Rs 85.95 on an intraday basis.
According to industry sources, the sudden move by Nissan to issue a termination notice was due to Ashok Leyland’s failure to pay royalty to Nissan for using its technology in developing powertrain products and other allied products for some time now. The royalty to Nissan would be more than Rs 200 crore, the sources added.
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