Why GM Decided to End its India Operations?

GM India

US-based General Motors (GM) has decided to stop selling cars in India by the end of 2017. The company will now entirely focus on its export operations. The decision by the company is the part of its series of restructuring actions. The company had done a complete review of its future plans for GM India, in June 2016, where it came to a conclusion that its greatest opportunity to drive its growth in India rests on the exports.

The GM’s manufacturing unit at Halol, Gujarat was shut on April 28, 2017. While the company will use its local manufacturing at Talegaon near Pune to focus on its export markets.

Why GM decided to shift its focus on Exports?

According to Stefan Jacoby, executive vice president at GM and president of GM international, the company explored many options but finally came to the conclusion that the increased investment planned for India will not be able to generate good returns. He also said that it will not help the company to achieve long-term profitability in the domestic market, hence, the decision taken will support the company’s global strategy and would result in better returns for the shareholders.

GM India had been facing consistent losses in the country. Due to the losses every year by its India division, GM was forced to review its future plans and investments in the country. Moreover, the company was also having a net loss of Rs. 3,812 crore in 2015-16.

Company’s Talegaon plant currently produces hatchback Chevrolet Beat for export markets, including Mexico and other Latin American market. According to the GM India President and Managing Director, Kaher Kazem, along with the hatchback Beat in Talegaon plant, the company is planning to introduce sedan variant of the same for export markets. The company will also continue to operate its technical centre in Bengaluru.

GM India will be exporting vehicles mostly to Latin America and Mexico, while GM Korea, an established export hub of the company will be exporting vehicles to South East Asia, North America and Australia. The decision of GM to continue the production in India is also due to the lower raw material prices and inexpensive and skilled labor force to cater to international markets.

What do the Numbers Say?

According to the Society of Indian Automobile Manufacturers, the sales of passenger vehicles in India grew by 9.23% in April-March 2017. While the growth in commercial vehicle segment was 4.16% in the same period. In April-March 2017, Passenger vehicles registered a growth of 16.20% in exports and commercial vehicle segment exports registered a growth of 4.99%.

GM India will closely work with the customers and dealers affected due to the decision and the customer support centre will remain open.

About the Author

Nikhil Kaitwade

With over 8 years of experience in market research and consulting industry, Nikhil has worked on more than 250 research assignments pertaining to chemicals, materials and energy sector. He has worked directly with about 35 reputed companies as lead consultant for plant expansion, product positioning, capacity factor analysis, new market/segment exploration, export market opportunity evaluation and sourcing strategies.

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