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Business News/ Companies / News/  GM to review its plans for India
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GM to review its plans for India

General Motors has decided to hold investment and product plans citing a change in customer preference, regulatory uncertainty

GM’s executive leadership team led by Mary Barra is expected to visit India next year. Photo: BloombergPremium
GM’s executive leadership team led by Mary Barra is expected to visit India next year. Photo: Bloomberg

A year after Mary Barra, chairman and chief executive of General Motors Co. Ltd, visited India and announced a plan to overhaul its local unit, three key initiatives that were central to the company’s revival strategy have come unstuck.

Among other things, Barra wanted to shutter the carmaker’s Halol factory in Gujarat, spend $1 billion in expanding its Talegaon factory in Maharashtra and introduce 10 new models, including model refreshes, over the next five years. GM has now decided to hold back the investment and its product plans citing a change in customer preference and regulatory uncertainty.

While a previous company statement had said that production at the Halol plant will continue till March 2017, two people familiar with GM’s plans said that production may continue in one form or another since the carmaker is planning to roll out a new version of the Tavera early next year.

Tavera accounts for two out of every five cars GM sells in India. The firm weighed the option of “shifting the assembly line from Halol to Talegaon, but decided it was not economically viable", said one of the two people.

“We are exploring a number of options in relation to the Halol site, including its sale. Selling the plant may include contract manufacturing to ensure continuity for the upgraded Chevrolet Tavera. This extension will ensure an orderly transition for employees, suppliers and other stakeholders," said a GM spokesperson in an emailed response to Mint’s questions.

The Halol factory is one of the two facilities GM has in India with a capacity to manufacture 127,000 cars a year. The other factory at Talegaon can manufacture 160,000 units annually. With tepid sales in the domestic market, both plants are grossly underutilized.

Despite its presence in India for at least 20 years, GM has failed to crack the Indian market with less than 1% market share. It had average monthly sales of about 1,172 units in the June quarter, a 67% decline from a year ago.

“In addition to the shift in customer preferences, the industry is facing unprecedented regulatory uncertainty. Like our competitors, we are paying close attention to how this impacts our business. In light of this, we are conducting a full review of our future product program in India," said the spokesperson in an email response to a detailed questionnaire.

The passenger vehicle market in India has seen a radical shift in consumer preference from cars to sports utility vehicles, or SUVs, which now account for a quarter of sales. Changes in regulations, such as the recent stricture on diesel vehicles by the Supreme Court have also swung demand in favour of petrol models and prompted companies to rework product strategy.

Television channel ET Now first reported on 15 July that GM has put its earlier announced $1 billion plan on hold for an undefined period of time, citing unidentified people. GM is also putting off plans to source components for India while it conducts a full review of its future product programme and putting on hold future investment in all-new vehicle family in India until it firms its product portfolio plan, said the spokesperson.

As part of the earlier plan, GM was to introduce models from Global Emerging Market (GEM) platform from 2019 onwards. These included a sedan, a hatchback and an SUV. Last month, GM said it has shelved plans for Spin, a multi-purpose vehicle.

“We have a strong plan to launch at least five new Chevrolet models in next 24 months, including the new Trailblazer, new Beat, Essentia, new Cruze and Beat Activ. Beyond our near-term product portfolio, we’d not comment on future products," said the spokesperson.

Most launches lined up in the near term are essentially spruced up variants of existing models.

“GM’s market share India has been continuously eroding. But the company doesn’t seem to be in a hurry to recoup it," said Puneet Gupta, associate director with IHS Automotive, a sales forecast and market research firm. Gupta pointed out that the only new introduction next year in the mass segment is the Beat hatchback and its sedan version Essentia which is already too late vis-à-vis competitors.

GM’s attempts to close the Halol factory in September last year was met with criticism from Gujarat government that questioned the move to shut down a successfully running factory, a senior state government bureaucrat said. “We have, in fact, suggested them to invest more in the Gujarat factory as they have already reaped benefits of about 800 crore as incentives from the state government," said the official.

To review India plans, GM’s executive leadership team led by Barra is expected to visit the country early next year, said the two people cited earlier who are aware of the Halol plant’s fate. The GM spokesperson declined to comment on Barra’s India visit saying that “we don’t comment on future travel plans of our executive leadership team".

maulik.p@livemint.com

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Published: 25 Jul 2016, 01:39 AM IST
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