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Business News/ Companies / Can Chevrolet play catch-up in India?
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Can Chevrolet play catch-up in India?

General Motors seeks to put behind 2013 recall of Tavera models with new models and a focus on exports

The Indian unit still lags behind GM’s operations elsewhere in the region. In fact, since entering India in 1994, the company’s vehicle sales crossed 100,000 units only in 2010 and 2011, and dropped thereafter. Photo: BloombergPremium
The Indian unit still lags behind GM’s operations elsewhere in the region. In fact, since entering India in 1994, the company’s vehicle sales crossed 100,000 units only in 2010 and 2011, and dropped thereafter. Photo: Bloomberg

New Delhi: There’s nothing General Motors India Pvt. Ltd’s (GM’s) managing director Arvind Saxena would like better to put behind him than the 2013 recall of the Chevrolet Tavera. Yet, Saxena keeps fielding questions about the recall at every company event, interaction and promotion where reporters are in attendance.

“Let us not keep relating GM with this episode," said a visibly irritated Saxena, who is otherwise seemingly unflappable, when asked about the recall in a recent interview. “We have more things to do in this business than just to tackle this one."

In one of the largest recalls in the Indian automobile industry, GM India in July 2013 called back 114,000 Tavera multi-purpose vehicles (MPVs) to address emissions and specification issues. The American auto maker had then admitted to the government that its officials had fudged emission data related to the Tavera. Till date, GM India has rectified the problem in only 45,000 units.

To be sure, Saxena wasn’t at the helm when the recall took place. An industry veteran of 31 years, Saxena was appointed GM India president and managing director in February 2014, having last worked as managing director of passenger cars (Volkswagen brands) and a board member of Volkswagen Group Sales India Pvt. Ltd.

Saxena was given the job of turning around the fortunes of GM India at a time when the company’s sales had been declining in the wake of the Tavera recall.

His appointment ended a decade-long tradition of foreigners heading the company’s India operations as the Detroit-based management of the auto maker opted for an Indian with substantial local experience to succeed Lowell Paddock, who moved to GM International Operations.

It was part of a broader management shuffle intended to give greater focus to the rapidly growing markets such as Africa, SouthEast Asia, Australia and New Zealand, India, South Korea, and West Asia. In North America and China, GM’s business was highly profitable and expanding.

The Indian unit still lags behind GM’s operations elsewhere in the region. In fact, since entering India in 1994, the company’s vehicle sales crossed 100,000 units only in 2010 and 2011, and dropped thereafter.

The company introduced its first made-in-India model—the Beat compact car—in 2010 and became the fifth largest car maker with a 5% share of the Indian passenger vehicle market, trailing behind Maruti Suzuki India Ltd and Hyundai Motor India Ltd, with 45% and 15% share, respectively.

And then lightning struck in 2013 with the Tavera recall.

To avoid a potential government probe, GM admitted it fudged emissions data for Tavera. In the fallout of the incident, the GM management sacked around 25 people globally. Mint reported this first on 26 July 2013.

The incident was so damaging that GM’s sales in India started shrinking rapidly. From 92,435 units in 2012, sales fell to 86,829 units in 2013 and 58,514 units in 2014.

The last two years dovetailed with an industry-wide downturn in the face of slower economic growth and consumer demand, and high interest rates.

When Stefan Jacoby, executive vice-president and president of consolidated GM International Operations, handed the job of India chief to Saxena, whose resume includes experience ranging from a stint in the hinterland of Bihar to heading Volkswagen AG’s India unit, his madate was clear: Pull GM out of the mess.

Mission mode

This is Saxena’s eighth job in a 31-year career in the automobile industry, where he started as an area manager in Patna for Escorts Ltd’s now-closed motorcycle and scooter division.

His assignments include two stints at Maruti Suzuki, where he served as deputy general manager for the western region between April 1995 and February 1999 and later as chief general manager (sales) between April 2003 and October 2005.

He worked at Hyundai Motor India from November 2005 to July 2012. His assignment as managing director of Volkswagen India lasted only 15 months.

Saxena said he is “content" and will not look for “another change" in his career beyond GM. That’s understandable considering the fact that Saxena is 57 and has three years with him until he retires in 2017.

But make no mistake—retirement isn’t on Saxena’s mind. Having spent a year at the company, he is determined to complete his mission of restructuring the business and selling cars.

“See there are two different approaches—one is to try and dissect what has happened in the past and the other is an opportunity to bring a desired impact. If my objective is to make this business viable, we need to repair and build on what we have got. Frankly, an analysis will not always get you the right result," he said.

A turnaround is still some distance away. GM India has now slipped to the eighth position by market share, having been overtaken by Honda Cars India Ltd and Toyota Kirloskar Motor Pvt. Ltd. In this calendar year, when the car market is set to rebound on an expected decline in interest rates and fuel prices, Saxena forecasts sales at around 57,000 units.

That in a market and a year in which the Society of Indian Automobile Manufacturers (Siam) is projecting passenger vehicle sales to accelerate from 2.57 million units last year.

It commanded a less than 2% share in a market that sold 2.35 million passenger vehicles during the April 2014-February 2015 period. The company’s sales dropped 35.37% during the period, when the overall market expanded by a modest 4%. GM India is also losing dealers on a regular basis. As many as 12 dealers have left the company in the last two years. It now has 245 dealers.

Unlike in China, GM hasn’t quite got it right in India. In the year ended 31 March 2014, the company ran up a loss of 3,847 crore, according to the Registrar of Companies, widening its accumulated loss since inception to 6,587 crore.

Saxena is counting on two new models—the premium sport utility vehicle Trailblazer and MPV Spin—to refurbish the brand image and put it on the cusp of a turnaround.

The Trailblazer, which will hit the roads in late 2015, will be imported from Thailand as a completely built-up unit. GM will start selling the Spin in India in 2016 and is exploring possibilities to export the model to Mexico from India, where it will manufacture the vehicle.

Besides, it has a radical new plan to turn around the local unit by increasing its focus on exporting cars to overseas markets. GM India, which exported at least 1,000 vehicles in 2014, aims to ship out as many as 19,000 units in the current year and 40,000 in the following 12 months, a move that will help Prime Minister Narendra Modi’s Make in India programme.

The company plans to export to as many as 30 countries from India. This will help in utilizing the installed capacity of 280,000 units at its two plants in India, located in Halol in Gujarat and Talegaon in Maharashtra.

A global realignment will help India’s case. GM has announced plans to shut its manufacturing operations in Russia and Indonesia, and scale down production in Thailand. Some of the production will shift to India.

Here for the long haul

A person who is familiar with the company’s plans said GM was targeting sales of around 50,000 units in India in 2016. Sales will rise substantially to 93,000 units in 2017, when the company is expected to introduce two models in the mass-market segment, according to this person.

By then, India is expected to be the world’s third largest market for automobiles, behind only China and the US, according to the government’s Make in India website. GM’s internal assessment is that India will be the world’s third largest car market only by 2020.

According to another person who has business interests with the company, GM will introduce 36 models globally in the next two years and at least 20% of them will come to India, which include Spin, Trailblazer, the new Tavera with Isuzu’s Euro IV diesel engine, and full model changes of the Beat and the sedan Cruze.

The company has outlined product quality as another area of importance in order to make its business more sustainable.

In February, it held a dealers’ meeting in Bangkok, which was attended by Jacoby of GM International Operations, beside top executives from the auto maker’s global quality, marketing and finance teams.

“It was not a usual dealer meet. For the first time, there was a representation from the global team and they made it clear that there will be absolutely no compromise on quality," said this person, who attended the meeting. “That was a refreshing change from the past, which shows the intent."

Saxena handed the dealers five pointers (the top 5 reasons to own a GM model) to sell Chevrolet cars. Now, if a customer walks into a GM showroom and enquires about a product, the salesperson will only talk about the top five reasons why the customer should buy the car.

To support dealers, Saxena has also raised the margins on every car sold to 10%—a benchmark in the industry—from 5%.

According to Vikas Sehgal, partner and executive vice-chairman, and global head of automotive sector at Rothschild and Sons, a global financial advisory firm, it will take some doing to get GM India back on track and make it a serious competitor in the local market, given that much of GM’s attention is focused on North America and China, its biggest markets.

“If Arvind Saxena does the best that he can, he can still do only so much as the products are decided in North America. Due to the sheer scale sales in North America and China, the profitability is very high in those regions," he said.

In the US, car makers sell about 17 million units a year at an average price of more than $30,000 per unit, said Sehgal. India, on the other hand, is a market where sales are 2.5 million a year with an average price of around $9,000.

Along the most critical PV (Price x Volume) dimension, India is dwarfed by pretty much every major market, he added.

In China, the average price of a car is inching past $20,000. When the Indian market reaches the PV levels of France or Germany, the intensity and nature of the competition is likely to change dramatically, he said.

“Until that happens, let me tell you, GM has chosen to be not successful in India," Sehgal said.

That’s not something Saxena will have you believe. He is determined to change GM’s fortunes in India. “Things cannot possibly continue as they have done," he said.

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Published: 02 Apr 2015, 12:20 AM IST
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