New Delhi: The Indian unit of auto maker General Motors Corp. (GM) is exploring the possibility of assembling low-cost pick-ups and vans here to boost its market share, according to its top Asian executive.
GM makes pick-ups and vans around the $5000 (Rs2 lakh) price point with its Chinese associate SAIC-GM-Wuling Automobile Co. Ltd.
We are “looking at India as one of the markets”, said David N. Reilly, president for GM’s Asia-Pacific division. “But you can’t just transport the low costs outside China...many local provinces support manufacturing there,” he said, citing trained manpower as one example of an incentive.
Reilly didn’t cite other examples, nor did he elaborate on whether he was looking for incentives in India.
The firm, he said, would take a decision within a year, because the car maker has commissioned a study to see if it is possible to replicate similar manufacturing costs in India.
In India’s value conscious market, low-cost and high-mileage vehicles are the best- sellers, be that in cars such as the Alto or light trucks such as Tata Motors Ltd’s Ace. Interest rates—at a five-year high—are adding to demand for more affordable vehicles as most Indian buyers finance their auto purchases.
India’s passenger vehicle market is growing, though at a slower pace, prompting many foreign auto makers, including GM, to build up to cater to a growing middle class, and an appetite for goods and big-ticket buys.
GM is investing about $300 million to build a factory in Talegaon, on the outskirts of Pune in Maharashtra. The company is also planning to build an engine and transmission plant near Talegaon as part of its $3-4 billion expansion plan in the Asia-Pacific region up to 2011. Reilly said the Talegaon plant will start trial production later this week and commercial production by the end of 2008.
GM reiterated that it will introduce a second small car in India in two years even as it is working on a car that’s cheaper than the lowest cost car it currently produces, which sells for around Rs3 lakh. Its first effort to enter the small car market was the Spark, which it started selling last year. About 10 months after its introduction, the Spark has propelled GM’s growth to 74% so far this fiscal, from 26% last year.
Three out of four cars sold in India are small vehicles. This has led to firms such as Ford Motor Co. and Honda Motor Co. to develop new cars in this segment even as Tata Motors readies the world’s cheapest car, priced at Rs1 lakh.
“It (the Tata Nano) has opened up discussion on lowering the prices that were previously thought as low prices for a new car,” said Reilly. “We do not intend to compete with the Nano. Many companies, including us, are thinking of what we might want to do at lower than our lowest cost product,” he added.