One of the early entrants in the Indian automobile space, US-based General Motors (GM) will stop selling cars in the domestic market by the end of 2017, and would use its local manufacturing base at Talegaon (near Pune) to focus on the export markets.
The company informed its Indian employees of the decision on Thursday and also said that it would continue to support Chevrolet customers and honour warranties. GM India said it will work closely with affected customers and dealers on a transition plan. The company would continue the technical centre in Bengaluru, which works for global operations and employs around 2,500 people. Its Talegaon plant too employs around 2,500 people.
Terming it a "tough but necessary decision", GM India President and Managing Director Kaher Kazem said that on the export front the company is optimistic about 'path ahead'.
As such, the Indian arm's sales for the financial year (FY) 2016-17 had fallen to a meagre 25,823 units, taking the market share of GM India to around 0.85 per cent in the domestic passenger vehicle space. Exports, on the other hand, have surged 89 per cent during the same period to 70,969 units.
Kazem said that the final decision was taken recently, although it was many months in the making. Business Standard had reported in March the company was likely to make an exit from the domestic market and turn Talegaon into an export hub.
The company said the decision follows a comprehensive review of future product plans for GM India. It is part of a series of actions taken by GM to address the performance of its operations worldwide. "Through the review, which began in June 2016, the company determined its greatest opportunity in India to drive shareholder return rests on focusing on exports from India," it said in a statement in Ahmedabad.
Stefan Jacoby, GM executive vice-president and president of GM International, said, “We explored many options, but determined the increased investment originally planned for India would not deliver the returns of other significant global opportunities. It would also not help us achieve a leadership position or compelling, long-term profitability in the domestic market.”
As GM moved to consolidate Indian manufacturing at its Talegaon assembly plant, the company ceased manufacturing at its Halol plant on April 28, 2017. Negotiations continue on the asset sale at Halol. GM's partner and Chinese auto major Shanghai Automotive Industry Corp (SAIC) is in fray for the Halol assets. However, recently it has clearly indicated that the deal with GM India is subject to settlement of labour disputes.
Talegaon plant has an installed capacity of 160,000 units per annum and currently makes the hatchback Chevrolet Beat for export markets, especially Mexico and other Latin American markets. Elaborating on the export plans from India, Kazem said that apart from the hatchback Beat which now gets made in Talegaon, the company would soon introduce a sedan variant of the same for export markets. He, however, clarified that there were no plans of bringing in any other GM brand to India in the foreseeable future.
The buzz around GM selling its Talegaon assets has also been gaining ground off late. Sources indicated the company might sell assets to a player who would continue to contract manufactured vehicles for GM India. While Kazem did not wish to comment on speculations, he nonetheless said, "There might be a collaboration in the future, but as of now we cannot talk on what kind of collaboration that could be."
There are around 150 dealers with the company at the moment and 200 service centres including dealerships. Kazem did not wish to give out details on the inventory lying with dealers or the transition plan. He claimed that spares would be available for existing customers.
The move to turn Talegaon into an export-only plant will not impact GM Korea which is an already established export hub for the company. India would be exporting vehicles mostly to Mexico and Latin America, while GM Korea will export to North America, Austalia, South East Asia etc.
On the global front, the Detroit-based automobile major has said on Thursday that it will take a $500 million charge in the second quarter to restructure operations in India, Africa and Singapore. Moreover, it would also cancel the earlier plan of investing $1 billion in India to develop new products.
Since Mary Barra took over as GM chairperson and CEO in 2014, the company has been taking steps to focus on the profitable markets like China and North America, and restructure the not so profitable operations. For example, GM recently sold its loss making European operations to French carmaker PSA Group.
GM India Run so far
1928: GM began doing business in India, assembling Chevrolet cars, trucks and buses
1954: It ceased its assembly operations; GM continued with tie-ups with Hindustan Motors to build Bedford trucks, Vauxhall cars, Allison Transmissions and off-road equipment
1994: GMIPL was formed as a joint venture, owned 50 per cent by Hindustan Motors and 50 per cent by General Motors, to produce and sell Opel branded vehicles
1999: GM bought out the Hindustan Motors interest
2000: GMIPL moved its headquarters to Gurgaon
Until 2003: GMIPL continued to produce Opel cars at the Halol facility
2003: GM started production of Chevrolet vehicles at Halol and also opened its technical centre operations in Bangalore
2006: Purchasing and financial support services for GM operations located outside of India were included in technical centre operations.
2006: GMIPL began construction of a second vehicle assembly plant in Talegaon
2008: Talegaon began production of Chevrolet vehicles in September
2009: GM announced restructuring of its India operation into a 50-50 venture with Shanghai Automotive Industry Corporation of China, which is the partner of GM's main venture in China
2012: General Motors-Chevrolet announced that it has increased stake in its Indian subsidiary to 93% by buying 43% from its Chinese partner SAIC for an undisclosed sum.
a. GM said it would shut the Halol factory and spend $1 billion in expanding its Talegaon factory in Maharashtra
b. On July 29, GM India gave a notice to workers at Halol stating the company would shut down the plant by June 2016
c. Options included selling out the asset as well
d. Closure deadline extended beyond June 2016 for another year till March 2017
a. In March, Company announced final date of closure as April 28
b. On May 18, GM announces to stop sales of vehicles in India by the end of 2017; to focus on exports only from India .