General Motors India Sees Nowhere to Go But Up

MUMBAI – General Motors India remains a minor player in the local market and has yet to fulfill its parent company’s vision for it as a production hub both for domestic models and exports to developing markets.

But even as its share of the Indian market continues to shrink, the automaker appears to be suffering from no shortage of optimism. Its penetration of is below 1% in India, but by 2020 it hopes to double that figure.

GMI is adopting a new platform called GEM (Global Emerging Markets) for vehicles it plans to sell locally and in Southeast Asia and Latin America. Overseas sales totaled 37,082 in the 2015-16 fiscal year, the automaker’s first full year as an exporter, and were up 75%, to 64,823, in the first 11 months of the current fiscal year.

Earlier this month, GM India sold one of its two Indian plants, at Halol in Gujarat state, to Chinese automaker SAIC, a minority stakeholder. GM India’s total capacity is 287,000 vehicles and 160,000 engines, but its current output is less than 10%.

The automaker’s goal is to initially invest Rs800 billion ($12.2 billion) in the Talegaon facility, raise its annual capacity from 160,000 cars and 140,000 engines to 300,000 cars and 300,000 engines, then eventually increase its investment. Money from the sale of Halol is earmarked for investment at Talegaon, where GM India in March approved a new wage agreement increasing employee salaries Rs22,000 ($340) a month to 2020.

The automaker had kept the Halol factory open under pressure from workers and Gujarat state, which had provided GMI with Rs8 billion ($123 million) in incentives. Of Halol’s 1,100 employees, 350 were transferred to Maharashtra, 100 accepted buyouts and 650 did not. That dispute dragged on until GMI was able to sell the Halol facility to SAIC.

GMI’s fortunes peaked in 2010, some 14 years after it entered the Indian market, when light-vehicle sales jumped 60% from prior-year to 110,361, good for a 4% market share. Car sales steadily declined afterward (down 30.1% in 2016, according to WardsAuto data). Light-truck sales jumped 31.9% in 2013 but have fallen every year since.

Falling sales have been only a part of GMI’s woes since the turn of the century. Its JV with Hindustan Motors to produce Opel cars was dissolved after five years and it began focusing on building Chevrolet models in 2003.

The automaker in 2013 had to recall 114,000 cars with incorrect emissions-compliance certificates and in 2015 recalled 155,000 cars with defective keyholes. Those costs, coupled with sinking sales and other factors, added up to losses of $615 million that threaten its capitalization of $770 million.

GMI and GM’s other global affiliates watched anxiously as the parent company spiral downward into a brief bankruptcy and a government bailout in the late 2000s. By 2010, GM had become stable enough that Stefan Jacoby, chief of international operations, visited India and decided the country’s low labor costs would be an advantage as GM sought to penetrate emerging markets.

It took several years for GMI to establish itself as a low-cost producer, but after a 2015 visit by Jacoby and CEO Mary Barra, new plans were made to increase local investment, raise the domestic-sales target and focus more sharply on exports.

Plans call for GM Korea to produce vehicles for export to mature and developed markets and have GMI supply emerging markets in Southeast Asia, and South America, as well as Africa and the Middle East.