General Motors? bankruptcy in the US might spell a huge opportunity for the company’s subsidiaries in low-cost countries like India and China as it might look at using them as export bases for small cars in the next five years.
According to analysts, India has an edge over China because of low demand for GM vehicles here as a result of which a minimum of 50% of the company’s total production capacity will be left unused even if GM India registers a significant growth in 2009-10 once the company’s another small car hits the market.
“Export of GM cars from China and India could be a part of the company’s plans, in the not too distant future, for reviving sales across the US and Europe,” says Rakesh Batra, head (automotive practices), Ernst & Young.
According to Batra, India has a chance to get a good part of its export business from Europe as the parent company in the US has put its European brands like Opel, Saab and Vauxhall up for sale.
“GM India has a total installed capacity of 2,25,000 units and over a half of this will continue to be unutilised if GM restricts itself to India,” says a Mumbai-based analyst.
The Indian subsidiary is already working out plans for export of the upcoming mini car from India. “The small car, which will be developed on the platform of GM’s concept car, Beat, will be manufactured at GM India’s Talegaon facility for serving domestic as well as export markets in the Asia Pacific region and Europe, starting 2010,” says Karl Slym, president and managing director, GM India. The car, which would also be simultaneously manufactured in Korea, will be priced around Rs 4 lakh, he said.
According to Slym, it eyes a 10% growth in sales in 2009, same as 2008, despite the fall in sales in the first five months of this year. However, according to Siam, GM India registered a decline of 7.54% in 2008-09 at 61,526 units whereas the domestic passenger vehicle industry remained flat at 15,51,880 units in the previous fiscal.
General Motors is already talking about setting up another plant in China in three-four years time. The proposed facility will take up its annual capacity in China to beyond 1.4 million units. “We will take a decision of setting up another plant in China in 12 months and it is expected that the pant will be up and running in three-four years,” Nick Reilly, GM vice-president and head of Asia Pacific, said on Tuesday. “China is the major driver of growth for us and there was a jump of 75% in sales there at 1,56,000 units in May, signaling no impact of the parent company going bankrupt,” he said.