GM wraps up India exit as another Chinese brand plays saviour

For all practical purposes, General Motors had announced its India exit when it decided to close its Gujarat plant in early 2017.

The company had made known that it would also stop retailing cars here and use its other facility near Pune for overseas shipments, largely to Latin America. Workers in Gujarat were offered the option of moving to Pune but everyone knew that it was only a matter of time before the curtains came down on the GM chapter.

And this is precisely what happened a few days ago when Great Wall Motors announced that it would acquire the Pune plant. As in the case of Gujarat, when SAIC Motor Corp took over the GM facility, it was another Chinese automaker that has now played the knight in shining armour for Pune.

The sad part about the GM tenure in India was that there was not even a single occasion when it posed even a remote threat to existing players. In its earlier avatar with the Opel brand two decades earlier, it sure attracted top-end buyers but was in no hurry to rev up operations.

After all, the world was a different place then and GM was the monarch of all it surveyed. Quite unlike today, Detroit was the key reference point for the automobile industry with its top three residents — GM, Ford and Chrysler — firing on all cylinders.

India, on the other hand, had just opened its doors to multinational car companies and it was only natural for some of them to make a statement of intent. There was really no compelling reason for them to go flat out and aggression was not part of their DNA.

Compare this to Hyundai which made known that it was here to give the top player a fight. And Maruti Udyog, as it was then known, suddenly found a hitherto unknown Korean brand emerge in what seemed like a David versus Goliath script.

There was no such anxiety with GM which seemed quite content to let the ship sail at its own pace. It was doing well in other markets and India, in any case, had its own peculiarities as a price-sensitive region where high levels of localisation were imperative in order to make some kind of an impact. This meant profits would be slow in coming which simply meant India could wait.

Comfort factor

Further, there was a comfort factor for GM in the form of Suzuki in which it had a 20 per cent stake. The Japanese brand was ruling the roost in India with Maruti and till about two decades ago had made it quite clear that GM would be its preferred ally in the event of any move at privatisation.

At that point in time, the Centre had a stake in Maruti and was in no mood to give it up in a hurry. Problems were coming to the fore from time to time with Suzuki and things got pretty ugly in the late-1990s when the partners were literally snarling at each other.

It was only a matter of time, however, before Suzuki got into the driver’s seat at Maruti and GM would emerge its preferred partner. To that extent, its American ally had no reason to worry about building its market share here; or so it seemed then.

Things, however, changed when Daewoo went bankrupt and Ford emerged the highest bidder only to withdraw from the race subsequently. GM stepped into the picture, acquired the ailing Korean brand and went on to make a success story subsequently.

GM Daewoo created a competitive hub in Korea which helped out with many key global operations. In the process, however, Suzuki was no longer the top priority as it seemed earlier. The new growth script would now involve Daewoo as the important lever and it is no secret that the partnership worked out very well.

Yet, there was really no impact in India even while GM was keen on acquiring the Daewoo plant in Surajpur (Uttar Pradesh). Things did not quite work out according to plan even while GM had by this time attempted to reboot its India chapter with the Chevrolet brand.

After all, from its point of view, this would mean easier customer connect with a brand that had greater nostalgic resonance compared to Opel. The problem, though, was that greater focus was needed on the retail front and this is where GM struggled to make an impact.

By this time, Suzuki had taken charge of Maruti and was growing from strength to strength. Hyundai, similarly, was on overdrive with new products and had to its credit a smash hit with the Santro. Toyota and Honda had, meanwhile, created their own bases with brands like the Qualis and City.

Important region

GM continued to maintain that India remained an important region for business even while market share continued to remain elusive. This was in sharp contrast to China where it was among the top two players along with Volkswagen.

Then came the Lehman crisis of 2008 which caused the global economy to literally turn turtle as big auto brands came crashing down. Detroit was in a mess and Fiat took advantage of this opportunity to snap up Chrysler which has since led to a tremendous success story. GM was in all kinds of trouble and required the help of its loyal Chinese ally, SAIC, to throw a lifeline and pull it out of the abyss.

In India, the GM leadership went on a publicity blitzkrieg to assure customers and dealers that all was well. The company entered into a joint venture with SAIC where it was quite evident that the Chinese company would now play a big role in India.

SAIC was also keen on spreading its wings beyond China and this was where India was critical, both in terms of market potential as well as a hub for exports to the ASEAN region.

The GM-SAIC alliance, however, was of little help in terms of turning things around even while it promised plenty from the viewpoint of competitively priced cars and small pick-ups. GM quickly got back into the driver’s seat and its top management assured big investments coming in as part of the comeback script.

Nothing materialised eventually and even while India’s ad hoc policies were cited as reasons for the eventual decision to withdraw from the landscape, it was also evident that GM was pulling back from a lot of other regions. These included Russia, South Africa and ASEAN where clearly growth prospects were little to write home about.

When the India withdrawal was made public, it did not send huge shock waves across the automotive ecosystem. Sure, a big brand was exiting the retail landscape but it was not as if GM had ever been a heavyweight to contend with in the first place. Further, it had had its share of issues like the Tavera emissions saga which did not help from the viewpoint of brand image building.

Yet, even after the Gujarat plant closure, there was some optimism that the other facility in Pune would perhaps double up some day to reignite the Indian market. This was, however, wishful thinking since it was amply clear that GM was now on the defensive worldwide and would only pay attention to a handful of markets like China and Latin America (in Europe, it sold Opel subsequently to Groupe PSA).

Even as the Pune facility was operational for exports, reports were doing the rounds that PSA would consider taking it over to complement its own Chennai operations which it had acquired from the CK Birla group. It is also no secret that the JSW group was also in talks with GM to take over this plant for its electric car project.

JSW shelved its plans and it was back to square one for Pune till Great Wall Motors came calling and quickly sealed a deal. In the process, it sent a clear signal that brands from China will have a huge role to play in India through this decade which will be one of mobility disruptions.

Inspired by SAIC

The success of SAIC has clearly emboldened the likes of Great Wall Motors to throw its hat into the ring and fight it out. Changan Automobile, likewise, is waiting in the wings and it is only a matter of time before it announces its plans. Indications are that the choice will boil down to either Gujarat or Andhra Pradesh unless the company throws up a surprise and acquires an existing facility on the lines of Great Wall Motors or SAIC.

FAW is yet another Chinese automaker that is keen on building its India presence which means the following decade will see another keen tug-of-war with a predominantly Asian feel.

Strong Japanese allies like Suzuki-Toyota along with formidable Korean players like Hyundai and Kia will take on the China onslaught.

GM, meanwhile, will have its own challenges to reckon with in the coming years. It is no longer in the top league and this is a slot taken up by VW, Toyota, Renault-Nissan and now the recently created duo of FCA-PSA.

GM had earlier rejected a merger offer from Fiat Chrysler and it will be interesting to see if it deepens ties with a Chinese brand like SAIC, for instance. After all, China has long taken over from where Detroit has left and this is a reality that other manufacturers will have to acknowledge whether they like it or not.

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