Global passenger car leader General Motors recently laid the foundation stone for its new factory in India at Talegaon near Pune with the ceremony being conducted by executives from GM as well as state government officials. The Rs 1,350 crore plant will build the latest version of the Chevrolet Spark small car from end-2008 and have a capacity of 140,000 units per annum. GM already sells the Spark in 150 other countries around the world and will be launching the current version from its Halol plant as early as April 2007 to capitalise on the explosive growth in demand for small cars.

The company had signed an MOU with the Maharashtra government back in August 2006 for the new plant and construction is expected to commence shortly. GM’s existing plant at Halol in Gujarat which makes the Aveo, SR-V, Tavera and Optra models is being expanded to 85,000 units per annum and there is a possibility that some of these models would also be made at the new Talegaon plant in the future. Construction of the new 300-acre Talegaon facility is expected to be completed in early 2008 and GM plans to hire around 1000 people for this plant.

“This marks the beginning of GM’s next chapter in India” said Nick Reilly, GM Group vice-president and president of GM Asia Pacific who was present at the ceremony. “By more than doubling our annual manufacturing capacity in India, the new plant will position GM for long term expansion in the world’s second fastest growing market” he added.

Regarding the potential for vendors to set up their plants near GM at Talegaon he said it would make sense for those components whose manufacture was labour intensive. However for complex and high-value parts like electronic control units and anti-lock brake systems, these could be sourced from vendors existing plants in other parts of the country.

Reilly also said that the company plans to launch the Spark from Talegaon with a local content of around 70 percent and subsequently with the localisation of the powertrain (engine and transmission), this should increase to over 90 percent. However, the decision on the powertrain facility will be taken after about six months and this plant may not necessarily be at Talegaon. He estimated that the cost of the powertrain facility would be equivalent to the amount being invested currently to set up the plant at Talegaon.

GM is also looking to source components from its Indian suppliers for its overseas plants and the company believes the increased volumes would mean lower costs for Indian suppliers in the long term. While Talegaon is being set up to meet the demand of the Indian market, Reilly did not rule out the possibility of exporting cars from there in the future.

On the growing demand for diesel cars in India, he added that GM would be launching the diesel version of its Optra sedan in 2007 and was also working to develop small diesel engines. Asked if whether GM could source diesel engines from Maruti’s new plant in the future, he said that “this was one possibility” but clarified that nothing had been decided just yet.

While admitting that GM was still a small player in India with a market share of just 2.3 percent, Reilly was confident that the company’s entry into the small car segment with the Spark would see its share increase substantially in the future. GM officials also said they were not too concerned about the arrival of Tata’s much awaited Rs 1-lakh car, which they reiterated would not affect demand for the Spark, which will be positioned at the upper end of the small car market.