The Indian unit of General Motors Corp. (GM) will build an engine and transmission factory to help cut the price of its cars and help it achieve a 10% market share by 2010.
“Our interest in this (engine and transmission) business is linked to exports as well,” said Karl Slym, president and managing director of General Motors India Pvt. Ltd.
Local production of engines and transmissions, which make up as much as 15% of the value of a car, will help cut costs for the company. The import duty of 7.5% on components sourced from outside the country makes GM’s car more expensive, compared with those of rivals such as Maruti Suzuki India Ltd, India’s largest maker of cars, and Korean Hyundai Motor Co. that source almost 95% of their small car parts locally.
“It helps to have local parts, especially in engine and transmission,” said Slym. “Cost is one of the factors.” Other car makers, such as Ford Motor Co. and Honda Motor Co., are also planning to build new factories to make engines even as they line-up their small car models. Every three of four cars sold in the country is a small car, a segment where the war for market share is often fought on price points.
GM currently sources engines for all its models, except the Tavera utility vehicle, from units in Australia and South Korea. Tavera engines are sourced from Hindustan Motors Ltd, which makes the Ambassador car. The company has set a target of achieving a 10% marketshare in India by 2010 for which it’s building a second factory.