General Motors Corp., the world’s biggest auto maker, plans to introduce two models in the Indian market, including a small car, so it can shore up market share in the dominant segment of the country’s 1.3-million-unit car market.
The Detroit-based company has just launched a small car called Spark, priced at Rs3.1 lakh. In addition to another small car, it is also evaluating entering another vehicle category as well.
“We intend to introduce a second mini into the market,” said D. Nick Reilly, president, Asia Pacific for GM.
“When we say new cars (for India), that’s referring to a second mini and potentially another vehicle in a completely different segment.”
“There is a top-end of the Indian market and we’ve products in the GM stable that certainly fit that,” said Reilly. “It’s a study we are undertaking. At the moment, we are focused on volume opportunities, but it’ll be wrong for me to say that we haven’t thought about that. That’s a possibility for the future.’’
The company, which is currently at No. 8 in terms of market share by cars sold, has been behind rivals such as Maruti Udyog Ltd and Hyundai Motor Co., which have built their market share selling small cars that account for 70% of the domestic market. Brands such as the Maruti 800 and Hyundai Santro run longer distances on a similar quantity of fuel and offer easier navigation through India’s smaller roads and crowded marketplaces, making them popular with first-time buyers.
On the other hand, growing affluence has prompted the likes of DaimlerChrysler and BMW to invest in India and expand the sales of their luxury cars. General Motors’ higher-end offering includes the Cadillac.
The nation’s economy is growing at 9% annually and, even though higher rates on car loans have stoked recent concerns that fewer people will be willing to finance their car purchases, demand for cars is expected to grow at 10-12% this year. With sales of passenger vehicles set to grow to 2.2 million in 2010, GM is spending about Rs1,400 crore to build a factory in Talegaon, on the outskirts of Pune in Maharashtra to ship out 1.4 lakh small cars in addition to its Halol unit which will make 85,000 units a year starting 2008. The company didn’t say what facilities it would use for making future models to be introduced in the country.
Reilly said the company will also offer diesel versions of existing models, such as the Aveo sedan and the Optra sedan, the petrol versions of which compete with GM’ toughest rivals, such as Honda Motor Co., which outsells GM’s offerings in that category.
“India is an important diesel market and so far we have no diesel engines,” conceded Reilly. “We haven’t got to diesel as fast as we would have liked, but, later this year, we’ll have diesel in the Optra. It’s coming only two months after its launch anywhere in the world.”
Introducing diesel variants has helped the sales of companies such as Ford Motor Co., which raised market share after the recent introduction of the Fiesta brand, which uses diesel. Maruti, which makes half the cars sold in the country, has also launched a diesel variant of its compact car Swift. Diesel is about 33% cheaper than petrol and typically tends to offer better mileage. The Spark is a reworked version of a car that belonged to Korea’s Daewoo, a firm that GM bought out in most countries, except India. GM lost ground in trying to bid for Daewoo’s car plant in Greater Noida. The plant subsequently went to Crosslinks Finelease Ltd, a firm promoted by Hyundai Motor India Ltd’s former president, B.V.R. Subbu. Reilly admitted that not acquiring the plant may have slowed GM’s expansion plans in a country where it is struggling with a 2.8% share of the passenger vehicle market, despite having started operations in the country 11 years ago.
“We took too long to find a second site,” said Reilly. “We were, for some time, negotiating for the old Daewoo site. It took too long and was fruitless in the end. We probably lost over a year in those discussions.”
The Spark, which currently has a local content to the tune of 40%, will see it increased to 70% by the end of the year, said Rajeev Chaba, managing director of GM India. Higher local content will enable the car maker to save on production costs and price the car competitively.