May 18 has turned out to be an interesting day for the Indian automotive market. Having opened with the news of Volvo Auto India announcing local assembly operations in Bangalore, the second half has seen General Motors announce plans to stop vehicle sales in the domestic market by the end of this year.
The American major, which had begun operations in the country 21 years ago, is to focus solely on exports, which have seen an uptick in recent years. On April 28, the company had shut down its Halol plant in Gujarat, preferring to continue manufacturing operations at the Talegaon plant in Pune.
After two decades in the Indian market, GM India has little to show in terms of sales and market share. In FY2017, the company sold a total of 25,823 units, down 20.64 percent year on year. Its market share was a meagre 0.85 percent. And in April, the company sold just 883 units or 29 units a day.
The Make In India strategy is helping sustain the drive for global OEMs like GM and also Ford, Volkswagen and Nissan. GM India, which produces the left-hand-drive Chevrolet Beat at its Talegaon, Pune plant, exports the car to many markets including Mexico, Chile, Peru, Central American and Caribbean countries, Uruguay and Argentina. In FY2017, the company exported 70,969 units, an 88 percent YoY growth.
The production line for the left-hand-drive Chevrolet Beat hatchback at the 130,000 unit capacity Talegaon plant.
Strengthening global business performance
According to GM, the decision to pull out of the domestic market is part of a series of actions taken by the company to address the performance of its operations worldwide.
India is not the only market in which the American auto giant is consolidating its operations. The company also announced transitioning its East and South Africa operations to Isuzu Motors and phasing out the Chevrolet brand in those markets too. GM International will streamline its region HQ office in Singapore which will retain responsibility for Australia, New Zealand, India, Korea and Southeast Asia. GM expects to realise annual savings of approximately $100 million as a result of these actions.
"As the industry continues to change, we are transforming our business, establishing GM as a more focused and disciplined company," said Mary Barra, chairman and CEO, GM. "We are committed to deploying capital to higher return initiatives that will enable us to lead in our core business and in the future of personal mobility."
"Globally, we are now in the right markets to drive profitability, strengthen our business performance and capitaloise on growth opportunities for the long term. We will continue to optimise our operations market by market to further improve our competitiveness and cost base," added Barra.
Stefan Jacoby, GM executive vice-president and president of GM International, said, “We explored many options, but determined the increased investment originally planned for India would not deliver the returns of other significant global opportunities. It would also not help us achieve a leadership position or compelling, long-term profitability in the domestic market. Difficult as it has been to reach this decision, it is the right outcome to support our global strategy and deliver appropriate returns for our shareholders.”
Talegaon plant to be export hub
The Talegaon plant, which has a vehicle manufacturing capacity of 130,000 units and 160,000 engines per annum, will now be dedicated to catering to export market, upcoming export vehicle launches and exploring longer-term strategic options.
With GM pulling out of the market, plans to launch three new Chevrolet products in 2017 – the new Beat, the Beat Activ (a crossover version of the Beat hatchback), and the Beat Essentia sedan – have now been shelved. However, these models will continue to be manufactured at the Talegaon plant for export to Mexico and the Central and South American markets. GM has already launched the Beat in these markets and the Essentia is expected to follow soon. In the past couple of months, there have been several sightings of these left-hand-drive camouflaged models being tested around the plant.
According to GM, "Our product plan has four to five years of forecast exports to Mexico and Central and South American markets from our Talegaon facility.We have a robust export pipeline that supports continued manufacturing at our Talegaon plant and further leveraging of our local supply base. We firmly believe that focusing our business on exports is the best option to deliver a profitable and sustainable business in India.
Kaher Kazem, president and MD, GM India, said: “GM India’s export business has tripled over the past year. Exports will remain our focus going forward as we continue to leverage India’s strong supply base. We recently launched the new Chevrolet Beat hatchback for export to Mexico and Central and South American markets and will launch the Chevrolet Beat sedan later this year for those markets.”
As regards support to existing GM India and Chevrolet car owners in India, Kazem said: “We will support our affected customers, employees, dealers and suppliers. Chevrolet owners can be assured that we will continue to honour all warranties and provide comprehensive aftersales support.” The company will work closely with affected customers and dealers on a transition plan. The customer support center will remain open and all warranties and service agreements, as well as ongoing service and parts requirements for all vehicles.”
End of brand Chevrolet in India
GM's decision to stop sales in the Indian passenger vehicle market, which crossed 3 million sales in FY2017 and is the fourth largest in the world, will bring closure to the Chevrolet brand. At a time when the global automakers are keen to have a footprint in one of the world's fastest-growing automotive markets, Chevrolet, which is one of the world’s largest car brands, doing business in more than 100 countries and selling more than 4.0 million cars and trucks a yearr, is saying adios to the Indian consumer.