GM India strives to localise parts

US-based automaker General Motors is accelerating its localisation programme in India with the recent commencement of trial production at its new body panel stamping facility at Talegaon. This new facility is part of GM’s car manufacturing plant at Talegaon and will supply body panels for the upcoming New Spark (M300) model, which the company plans to launch at the end of this year.

According to Karl Slym, president and managing director, GM India, "This stamping facility is part of the $300 million investment that we have put into the Talegaon facility and is a big step forward for GM in India.”

The company is also setting up a new engine manufacturing plant at an investment of $200 million, which is located next to the car plant at Talegaon. It will commence production at the end of 2010 and the car maker plans to export 20 percent of its engine production from early 2011.

This new plant will build engines for the New Spark model, including a 1.2-litre, four-cylinder, petrol engine with a displacement below 1200cc to meet Indian small car norms. It will also make a 1-litre, three-cylinder version of the 1.3-litre, four-cylinder, Fiat Multijet engine. “This facility is unique in that it can make both petrol and diesel engines in the same plant and on the same line. It will have a capacity of 160,000 engines per annum, which can be increased to 300,000 units over time. However, we will still be importing transmissions,” explains Slym.

GM is also working to increase the local content of its existing models, while keeping an eye on the actual cost of parts. “We look at ‘best landed cost’ as opposed to just localisation levels, which means that in some cases we would import a particular part because that would be cheaper than buying from an Indian supplier. Of course, this also varies depending on what is happening with the Indian rupee; nevertheless, our overall long-term goal is to increase localisation levels,” affirms Slym.

GM says its Tavera utility vehicle is already almost completely localised at 98 percent but its other models are at around 40 to 50 percent, while the Spark is at 45 percent and this is increasing every month.

“We are working to boost the capabilities of some of the local vendors through our Supply Development Group. It works with the suppliers to ensure that their quality and systems are in line with our needs and then we sign them up as vendors,” said Slym. The bulk of GM India’s imported components are sourced from GMDAT in South Korea and the company does not import components from China as yet.

Cruze to drive in soon

The company’s next new model in India is the new Chevrolet Cruze saloon which will be launched around September this year at an expected price tag of Rs 12 lakh. GM plans to start off production by assembling CKD kits. Slym says, “With the Cruze, we will rapidly increase localisation after the car is launched and this new model will be made at our Halol plant in Gujarat. I have recently driven the first Indian-made Cruze and I think it will be very appealing to customers.”

After the recent Chapter 11 filing by GM in the US, the company has launched its ‘There for You, There for India’ campaign which aims to reassure Indian car buyers about the company’s continued presence and commitment to the Indian market. “With this campaign we want to reassure our stakeholders that as far as India is concerned we still have the same goals and objectives.”

Optimistic about India

GM is also very optimistic about the prospects for the Indian car market during the current year. At the end of the last calendar year, GM grew 10 percent while the industry dropped two percent, with most of the decline happening in the last quarter of 2008. "When we looked ahead to 2009, we thought that the recovery would perhaps come at the end of 2009 or maybe not. But we have all been surprised at the speed of the recovery in the overall economy and the auto industry,"says Slym.

GM says it has seen growth in sales every month this year. Slym adds: "There is certainly a return in customer confidence and I am a lot more positive on the market now than I was in December last year. Unless there is some kind of drastic event, then I think we are already starting to see a good recovery. Last year we had predicted zero percent to negative five percent growth for the industry in 2009, but now we already growing at three to five percent and this should increase in the coming months.”

With the imminent arrival on road of the low-cost Tata Nano, GM actually expects that its sales of the Spark would get a boost. Slym says, “I am actually expecting to see an increase in Spark sales when the Nano comes out. The Nano will bring a whole lot of people into the market who would otherwise never have considered buying a car."

He adds, "Buyers very often end up buying something beside what they initially had in mind. So when the potential Nano buyer realises that he is actually paying more, like Rs 1.5 lakh, and that for about Rs 100,000 more he can get the Spark, which is a bigger and more powerful car, he may well go for it. So we end up with a whole new set of customers thanks to the Nano, especially if there is a long waiting list. Also, I really don’t think a Spark buyer would trade down to a Nano; so we are not worried about that.”

GM clearly hopes that its increasing focus on India will help it in turning around its fortunes.