General Motors puts $1 bn investment in India on hold

The reason for deferring the investment has been cited as a change in strategy to not limit the Indian market to the role of a an export hub but also have a profitable domestic business.

By: | Published: July 22, 2016 11:22 AM
gm-reu-L GEM platform has been specifically designed for entry-level compact cars that meet the requirements commonly found in emerging markets such as India, China and Brazil. (Reuters)

General Motors (GM) has decided to put its earlier announced $1 bn investment plan on hold for an undefined period of time, reports ET NOW. The investment announced last year was aimed at turning India into a global export hub as domestic sales continued to be disappointing for the company. The decision had been announced at time when GM announced to shut down its plant in Halol, Gujarat,with leaving the company with just one plant in Talegaon, Maharashtra.

The reason for deferring the investment has been cited as a change in strategy to not limit the Indian market to the role of a an export hub but also have a profitable domestic business. The company earlier had planned to make vehicles underpinned on the Global Emerging Market (GEM) platform in India for exports. GEM platform has been specifically designed for entry-level compact cars that meet the requirements commonly found in emerging markets such as India, China and Brazil. With the renewed focus on stabilising the Indian sales and performance first GM has its task cut out.

With loss-making operations, negligible market share and lack of a robust product portfolio, GM will have to approach the Indian market almost as a new market. The most important step will be to bring in appealing products since the vehicles from GM's Chinese partner SAIC have failed to make a connect with the Indian consumer. At the Auto Expo in Feburuary, 2016, the company did showcase the Chevrolet Essentia sub-compact sedan and Activ crossover but both of these seem incapable of turning around GM's fortunes in India.

It's good to see the focus of GM on improving its position in the Indian market and not just use it as an export hub. However, the task seems quite challenging and in lack of indication on how GM might plan to do this, it's hard to imagine such a difficult turnaround. One should keep in mind that the Indian automotive market is one of the harshest around and brand loyalty is one of the least, with the exception of a couple of brands. Making a comeback in such a market, already bustling with the presence of global carmakers can be a long process. Fiat is a one such example and they still aren't in a position anyone could term as positive. GM needs to understand that the Indian consumer has matured a lot in the wake of access to global technology and serving them cheap and unexciting vehicles will no longer work.

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