General Motors Has Finally Called Time On The Indian Market

| About: General Motors (GM)

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By Stuart Burns

You should credit the company for trying. As one of the first foreign multinationals to invest in the Indian market, General Motors (NYSE:GM) has been persevering for over 20 years.

This month, however, it has finally pulled the plug, announcing that it will stop making cars in India for the Indian market by the end of this year. That doesn't mean it will cease all manufacturing. Although the firm has already stopped its production in Gujarat, it will continue with its manufacturing foundry at Talegaon in Maharashtra, making parts and cars for export to the Asian and South American markets.

As part of a wider restructuring aimed at improving profitability, the BBC reported, GM has put a $1 billion investment plan for India on hold, while also pulling back in South and East Africa. The firm plans to sell a 57.7% shareholding and grant management control to Isuzu in its East African operations, as well as stop selling cars in South Africa and sell its Struandale plant there to the Japanese firm in a restructuring aimed at creating savings of $100 million per annum.

To be fair, minor successes aside, GM has struggled in India and failed to make much impact on a market originally dominated by domestic brands but latterly by Japanese and Korean firms. Even after more than 20 years, GM's Chevrolet brand only has 1% of the market.

Commenting on the earlier plan to invest $1 billion in the market to develop its product range in what is forecast to become the world's third-largest car market, GM's international president, Stefan Jacoby, is quoted as saying, "We determined that the increased investment required for an extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market."

However, the company's lack of success in India is not just down to a string of some 17 models it has tried to introduce to the market and failed to gain traction with Indian buyers. It is also said to be part of a wider failure to create a coherent and professional service network. This shows that companies need more than a decent car to gain sustainable market success.

When GM announced plans to sell its European Opel and Vauxhall brands earlier this year, it became perhaps inevitable that the company would also look to axe equally unprofitable operations in other parts of the world.

The company's sales in India are currently under the Chevrolet brand, but historically, some of its better successes have been under the Opel brand. The initially successful Astra is one example. But the Astra eventually failed to gain traction in this very cost-conscious market, losing out to cheaper local and overseas brands such as Daewoo, Ford (NYSE:F) and Hyundai (OTC:HYMLF).

The firm does continue to see a future in India as an automotive parts hub for the region and intends to manufacture and export both complete cars and parts from its remaining plant - at least for the time being.

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Tagged: , Auto Manufacturers - Major
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