GM faces uphill task in rebuilding India innings

For a company that has not capitalised on its first mover advantage in India, General Motors is keen to set things right this time around. The fact that it barely has a two per cent market share after nearly two decades here seems no deterrent either going by the top management’s renewed focus on this part of the world.

Mary Barra, CEO, has already indicated that GM will invest $1billion in India as part of a mid-term strategy. She was here with her top team in July and, more recently, early this month. Barra had already made known that the company would expand capacity at its Pune plant and launch new products. In the process, it would close down its Halol plant in Gujarat as part of the cleanup exercise.

How GM tackles this sensitive issue remains to be seen considering that it is happening at a time when job creation in India has been at its lowest level in many years. In this backdrop, the prospects of unemployment may not go down too well workers at Halol. It is likely that some will be given the option of moving to the Pune plant while others could get an attractive separation scheme.

Halol could be GM’s biggest challenge in 2016 as it navigates the process of transitioning completely to Pune.

There is no telling how workers will react to the move and the last thing the company would want to encounter is a potentially volatile situation that could go out of control.

The imminent closure at Halol is being planned at a time when Gujarat is being touted as the next automotive hub of India with high profile residents like Tata Motors, Ford, Maruti Suzuki and Honda.

GM will need to ensure that the Halol shutdown happens without a glitch.

Beyond this, the American automaker will need to put a carefully thought out business plan in place to revive its India business. It has already identified its potential as an export hub and will look at boosting shipments to Latin America. Africa could even be next in line given that some global automakers believe it could be the new growth engine for cars.

This is where GM will be keen on getting its intellectual capital at its R&D Centre in Bengaluru to participate more aggressively in its rebuilding efforts. Going forward, emerging markets like Latin America, India and Africa will be critical to the turnaround exercise. The company’s biggest strength is its China market where it reports sales of over 3.5 million units annually and is the second largest player after Volkswagen. It has cut back production in Indonesia and Thailand and the new focus on India is clearly a result of costs escalating in South Korea, a key manufacturing base since the Daewoo acquisition at the turn of this century.

Where GM will face a real challenge is to plot a retail presence across India, especially in smaller cities and towns where demand for cars is on the rise. Dealers will need to be convinced why they need to team up with the company even if its long stint in the country has yielded a paltry market share.

If someone has to invest crores of rupees in setting up a showroom and after-sales service, he/she would be quite right in demanding a viable return on investment. GM’s India track record is not likely to encourage those levels of confidence and this is where it will have its work cut out. There is really no point thinking of top-class products without a retail strategy in place as it is akin to putting the cart before the horse.

Automakers have realised that doing business in India is not a walk in the park. Some complain that it is a market dominated by one player, Maruti Suzuki, but the reality is that the leader has been working relentlessly on better mileage for its products while ensuring low ownership costs. This is music to the ears of customers, which explains why they keep queuing up at Maruti dealerships.

GM, likewise, knows this only too well and also the fact that it is up against other rivals like Hyundai, Honda, Ford, Toyota and Renault. It did not step on the gas when it really mattered and has lost out in the process. How quickly GM makes up for lost time and opportunity is the million dollar question.  

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