US auto giant General Motors on Thursday said that it has decided to stop selling its cars in India by the end of 2017. The company, however, said that it will make India an export hub and will continue to make cars at its Talegaon plant near Pune for export purpose alone. These cars will be exported to Mexico and South and Central American markets. The decision comes at a time when India is set to become the world’s third largest auto market in the next three to four years with passenger vehicle sales expected to cross five million units annually from the current three million plus units. The new announcement also follows the company’s decision to close down its Halol plant in Gujarat. GM India saw its sales dwindling from a peak of over one lakh units during 2011-12 to a low of less than 26,000 units in FY17. Even the parent General Motors had to withdraw its $1 billion investment proposal in India as was announced by its CEO in 2015 owing to the falling domestic sales. The company has been selling cars such as Beat, Trailblazer among others under Chevrolet brand only in India.
Despite its presence in India for more than two decades, the company had failed to make an impact on the domestic market for want of products suited to the local market together with a weak distribution network when Maruti and Korean chaebol Hyundai made strong inroads through their India specific products and strategies. It is interesting to note that GM India’s exports more than doubled in fiscal 2017 to cross 70,000 units. In a statement, the company said the decision, which follows a comprehensive review of future product plans for GM India, is part of a series of actions taken by General Motors globally 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.
The GM Technical Centre-India (GMTC-I) in Bengaluru performs global work for GM. This work will not be impacted by this announcement, the company added. 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. Difficult as it has been to reach this decision, it is the right outcome to support our global strategy and deliver appropriate returns for our shareholders.” “Our decision in India is an important milestone in strengthening the performance of our GM International operations and establishing GM as a more focused and disciplined company,” said Jacoby.
This announcement is consistent with GM’s global disciplined allocation of capital and investment in its business around the world designed to generate stronger returns and drive shareholder value, he added. When contacted, Abdul Majeed, partner, PwC and an auto analyst, said: “The company did not have the local strategy or products to suit Indian market when other OEMs could do the same. Lack of volumes, increasing operational costs as well fixed costs must have hurt the company. May be GM will come back to India with right products and right strategy in future.”