Auto focus

GM will have its work cut out in India comeback

| Updated on: Jul 30, 2015
image caption

Rebuilding customer connect and taking on competition will be the challenges ahead

General Motors was among the earliest entrants to India along with Daewoo Motors and PSA Peugeot Citroen. Eventually, it snapped up the former in a global acquisition while flirting with the French carmaker briefly a couple of years ago by way of a seven per cent equity stake.

While Daewoo and PSA have long exited India, GM continues to plod even after nearly two decades when it should have been a serious contender in the leadership stakes instead. Early this week, its CEO Mary Barra said the company would invest $1 billion in the country as part of a long term plan which would see new products and capacity expansion with not-so-great news in the form of a plant closure.

This facility located in Halol is ironically located in a State which is being touted as India’s next automotive hub. Gujarat is home to top brands like Tata Motors and Ford with Maruti Suzuki and Honda in the queue. From GM’s point of view, continuing operations at this former Hindustan Motors plant hardly makes sense as its set about charting a new roadmap HM was, incidentally, GM’s ally for a few years when it first set foot here in the early 1990s.

The newer and more modern Talegaon facility near Pune, in contrast, will fit in better with the American automaker’s vision of making India an important production hub in the Asia-Pacific region. Its top leadership had already indicated earlier that costs were escalating in South Korea and it, therefore, made sense to look at more viable points like India to take the growth story forward.

Betting big The projected numbers were articulated at the press meet in New Delhi where it was made known that GM would look at producing 2.2 lakh cars over the next decade. Of this, nearly a third will be exported which means a relatively modest market share of five per cent in India.

On the face of it, this is still below par for a company that will have been around for three decades by 2025. Ironically, it may still end up being a tall order going by its track record though its leadership is clearly looking to the future and would much rather not dwell on the past.

The truth is that only two players – Maruti Suzuki and Hyundai – have dominated India’s landscape over the last two decades with a combined market share of nearly 65 per cent. Honda is working on a specific India strategy while Toyota still has not made a significant mark. Ford, Volkswagen, Renault, Nissan and GM make up the balance in this numbers arena which is largely driven by compact cars.

In its early years, there were indications that GM would partner Suzuki as part of a collaborative growth strategy. This was meant to happen once the Indian Government divested its stake in the then Maruti Udyog. Things changed when GM bought out Daewoo and later sold its 20 per cent stake in Suzuki globally. The GM-Daewoo combine ushered in the Chevrolet chapter in India at the turn of the century but not much headway was made.

Changing focus At one level, it could be argued that the country was not on GM’s priority list given that it was doing well back home in North America while aggressively building a presence in China. However, things started to fall apart in the aftermath of a split with Fiat and the downturn in Detroit which led to a huge crisis in the form of bankruptcy.

It was during this time that GM pulled out all stops to assure its dealers, suppliers and customers in India that things were on track and how it was confident of weathering the storm. It reached out to trusted Chinese ally, SAIC Motor Corp, and the two planned out a roadmap for India. This would include a product basket of cars, SUVs and light commercial vehicles. The next stopover after India would be the ASEAN region where SAIC hoped to build a presence in due course of time.

Nothing came out eventually with GM bouncing back globally and taking charge of its India operations all over again. Its Chinese partner will perhaps have to wait longer in the event it plans to build a presence here all over again.

So, it is back to square one for GM in India except that there is a clearer intent this time around. Challenges may come in the form of negotiating with the workforce at its Gujarat plant whose shutters will come down next year. Given the present fragile state of the job market, this imminent closure could create a tricky situation which needs to be handled with care.

It also remains to be seen if GM will contemplate having a partner on board while plotting its India comeback plan. Fiat has already been rebuffed (going by global media reports) and it may not be entirely improbable to rule out SAIC. The Chinese automaker did not make the cut earlier but could still be a key component of the revival plan.

Published on January 24, 2018

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

COMMENTS
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you