China’s Great Wall Motors Co. Ltd (GWM) is set to acquire General Motors’ (GM) Talegaon manufacturing plant near Pune, the two companies said on Friday, without divulging financial details.
Two people aware of Great Wall’s plans said, requesting anonymity, that the company has earmarked ₹1,500-2,000 crore to establish its brand in the Indian market.
“The total investments will include the cost of acquiring the Talegaon plant, which could be about ₹700 crore, along with equipment installations, assembly lines, new product development, manpower and processes, among others," said the first person.
On 10 November, Mint was the first to report that GWM and SAIC Motor Corp. were in talks with the Detroit-based car maker for a possible acquisition of the second plant.
GWM, the Baoding, Hebei-based leading manufacturer of sports utility vehicles (SUVs), and the American carmaker signed an official agreement on Thursday for the transfer of the Talegaon plant. “Under a binding term sheet signed yesterday, the GM India legal entity, which includes the Talegaon facility, will transfer to GWM," the statement said.
However, GM clarified that its sales arm Chevrolet Sales India Pvt. Ltd will continue to operate as an independent entity honouring all warranties, besides providing after-sales service and spare part support to existing customers in India. It continues to employ more than 100 people.
GM added it will provide a separation package and transition support to the affected employees, besides ensuring an orderly transition for partners. “The transaction is expected to close in the second half of 2020," it said in a note.
The purchase of the Talegaon plant will accelerate Great Wall’s India entry, as it plans its first commercial launch in the first half of 2021.
The carmaker will debut at the Delhi Auto Expo 2020 in February, showcasing the range of its passenger cars, including electric vehicles, under the Haval brand, besides sharing its roadmap for the local market.
GM’s Talegaon plant had an annual installed capacity to roll out 165,000 vehicles and make 160,000 engine units. GM, which stopped selling vehicles in India, had sold its Halol, Gujarat, factory to SAIC in 2017. China’s SAIC owns British brand MG Motor.
MG Motor India currently manufactures the Hector SUV from the same facility. The factory is under capacity-expansion and upgrading for BS-VI-compliant vehicles.
“The Indian market has great potential, rapid economic growth and a good investment environment. Entering the Indian market is an important step for Great Wall Motors’ global strategy," said Liu Xiangshang, vice-president, global strategy, GWM.
“It is also an important measure to respond positively to the Indian government’s national strategy of vigorously advocating Make-in-India, Digital India and a strong focus on clean energy," he added.
Puneet Gupta, associate director, automotive forecasting at IHS Markit said that while Great Wall Motors’ acquisition GM’s Talegaon plant will expedite its production plans, the strategic location offers a well-established supplier base.
“This is the single biggest move by Great Wall as acquiring a ready-made plant enables them to bypass the basic formalities required and time consumed in setting up a manufacturing facility. This helps them focus more on their product strategy for India. Being one of the largest SUV makers globally, GWM is very serious about India as they look to compete for a good market share going forward," he added.