General Motors India (GMI) Private Limited, a subsidiary of the world’s biggest auto maker General Motors Corporation, has decided to enter into India’s small car market by assembling completely knocked-down (CKD) kits of the Chevrolet Spark that will be imported from the company’s Korea plant.
The company’s decision to bring in CKD kits is driven by the fact that its Halol plant in Gujarat, where capacity is being expanded to 85,000 units a year from the current 66,000, cannot accommodate another new model at this point, according to sources close to the development.
Rajeev Chaba, president and managing director, GMI, did not say anything about CKDs but said the company has been importing components for the Spark and assembling the cars at the Halol plant. “We, however, have a strong localization plan for the car,” he added.
Apart from capacity constraints, GMI’s move may also be prompted by the company’s desire to have a presence in the biggest segment of the Indian car market, and one it has ignored in the past. Of the 1.3 million passenger vehicles sold in India in 2006-07, around 61% were small cars. The Spark is one of General Motors’ best selling cars in Europe and will be available in a 1-litre-petrol-engine version in India. Indian rules stipulate that excise duty on cars that are not longer than 3.8 metres and have engines with capacities lower than 1.2 litre will be charged at 16%. It is 24% for all other cars.
Chaba said that GM CEO Rick Wagoner would come to India on 17 April for the launch of the Spark, which is essentially a contemporary version of the Matiz, a car that was launched in the country by Daewoo India in the late 1990s; GM subsequently acquired Daewoo’s operations in most countries including Korea, but not in India.
The Spark will compete with a clutch of existing models including Maruti Udyog’s Alto and WagonR; Hyundai’s Santro; and Tata Motor’s Indica.
“The decision is also driven by the fact that the company does not want to lose out to other global players such as Volkswagen, Honda and Toyota which have big plans for the Indian small car market,” the source said. Volkswagen, incidentally, is expected to roll out a small car from the facility of its group subsidiary, Skoda, at Aurangabad, Maharashtra, by the end of the year.
Wagoner’s forthcoming visit to India is indicative of the growing importance of the country to the company; car makers are increasingly looking at emerging markets to drive sales. Wagoner recently attributed the company’s dramatic turnaround in the last quarter of 2006—the company posted a net income of $2.2 billion for the entire year as compared to a net loss of $3.2 billion in 2005—to cost-cutting measures in North America and gains in emerging markets.
Sources said the firm would initially import 30,000-40,000 kits of the Spark before it starts manufacturing the car at a greenfield plant at Talegaon near Pune, where it has acquired 300 acres of land; the $300 million plant, according to the company’s plans, will have the capacity to make 1.4 lakh cars when it starts production, and an eventual capacity of 2.2 lakh cars. It will start rolling out cars by the end of 2008.
GM’s Halol plant currently manufactures 66,000 units of the Optra, Aveo and Tavera. The introduction of a small car would require an additional line to be put in at the Halol plant which does not have the infrastructure to accommodate it, said the sources.
Chaba admitted as much. “From January to December 2007 we only have a capacity of 66,000 units available. The Spark will go into production in April, and depending on availability, we hope to make 2000-3000 units every month,” he said.
The market for cars in India is expected to grow from 1.3 million in 2006-07 to 2 million in 2009-10.