End of the road in India for GM

With its domestic sales having hit the skids, General Motors decided on Thursday to exit the Indian market by the end of 2017, and focus instead on manufacturing vehicles for export.

For the US automaker, which has been in India for over two decades, the dramatic decision follows a comprehensive review of future product plans for GM India and is part of a series of actions taken by the US headquarters to address the performance of its operations worldwide, the company said.

Through the review, which began in June last year, the company felt that it made more business sense to export its products from India rather than sell here.

General Motors started in India in a joint venture with Hindustan Motors in 1995, using the latter’s plant at Halol in Gujarat. It started selling cars under the Opel brand, and later switched to the Chevrolet badge.

In 2015, on a visit to India, GM CEO Mary Teresa Barra had announced plans to invest $1 billion in India to increase manufacturing operations and launch 10 locally produced models. But sources say the company did not make that investment — and in fact GM has not invested much in India since its inception. It, however, did spent $1 billion from 2003 to 2011 on the Chevrolet brand.

GM India’s sales were down 21 per cent in 2016-17 to 25,823 units. Its production, however, grew 16 per cent to 83,368 units, mainly for export. The exports are centred around its small car ‘Beat’.

Stefan Jacoby, Executive Vice President and President of GM International, said the company had explored various options, but felt that increased investment in India would not deliver the kind of returns on offere elsewhere. “It will not help us achieve a leadership position or long-term profitability in the domestic market,” he said.

According to analysts, GM’s exit will affect the morale of global manufacturers who are eyeing the Indian market. “At one end, we are eyeing sales of 10 million cars by 2030, and on the other, we are seeing global brands losing faith in our market,” said Puneet Gupta at market researcher IHS Markit.

GM said it would leverage its Indian supply chain for manufacturing vehicles for exports, and the manufacturing plant at Talegaon in Maharashtra, currently being used 90 per cent for exports, will now be used 100 per cent.

The company said it was in talks with its dealers to take care of service and spare parts of existing GM vehicles on Indian roads over the next few months.

“There is a team for after-sales services as well as to serve customers beyond the warranty period with spare parts. We will support our customers, employees, dealers and suppliers. We will continue to honour all warranties and provide comprehensive after-sales support,” Kaher Kazem, President and Managing Director, GM India, said.

The GM Technical Centre-India (GMTC-I) in Bengaluru will continue to perform global work for GM. This work is not impacted by this announcement, he said.

On the employees’ front, Kazem said GM has offered to shift its 1,100 employees from Halol, where it ceased operations on April 28, to Talegaon to support the 2,500 workers already there. Negotiations for sale of the Halol assets are on. Sources say MG Motor, a subsidiary of SAIC Motor of China, is looking to buy the Halol plant, without taking on board the workers.

“MG will probably buy the Halol plant, but it wants the employees’ issues to be resolved,” a source close to the developments told BusinessLine . The MG brand is expected to showcase some models at the Auto Expo next year and enter the Indian market in 2019, the source added.

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