The realities of global manufacturing, more than the Prime Minister’s clarion call to global manufacturers, lie behind General Motors’ new ‘Make in India’ plan. GM plans to invest $1 billion in India as part of a revival plan which will also see closure of a decades-old plant in Gujarat. More significantly, this will see global cars being made locally. However, hard calculations lie behind this. GM has been among the longest automotive residents of India but has an embarrassingly low market share of barely two per cent. In sharp contrast, it is firing on all cylinders in China. Perhaps it just did not make sense to invest in India which was, and continues to be, an extremely price-sensitive market where profits are slow in coming.

GM is keen now to put things back on track. It rightly reckons that it has everything in place right from cerebral power in a robust R&D set-up at Bengaluru to a state-of-the-art plant near Pune. In addition, India has some top quality ancillary suppliers who already part of many global automotive projects. The reality, though, is that this goes beyond the PM’s clarion call. GM’s manufacturing costs in South Korea, its traditional manufacturing point in Asia, are on the rise. Further, operations in Indonesia and Thailand are being pruned even while China is going strong. Consequently, India has emerged the best alternative as a production hub where a third of output will be exported.

This is something that other automakers such as Maruti Suzuki, Ford, Renault-Nissan, Hyundai and Volkswagen have already kicked off in right earnest. As costs continue to escalate across the West and emerging economies become new growth markets, it makes sense to work in countries like India. It is the only way to offer cost-competitive products in Latin America or South Africa.

Murali Gopalan Senior Deputy Editor

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