General Motors India is gearing up for its two key launches later this year ? the Sail hatchback and the Enjoy multi-purpose vehicle ? which it hopes will add volumes, especially in a year that has seen the auto industry beset by multiple concerns. With the government mulling higher taxes on diesel cars, GM India president and managing director Lowell C Paddock, who was in Bangalore for the state?s Global Investors Meet-2012, told Ajay Sukumaran that this is possibly the worst time for such a move. Edited excerpts:

How has the market been since April?

It has been a period that has seen a lot of opportunities and challenges. We saw, owing to the Budget, a lot of pull ahead of sales particularly on diesel given the potential excise on diesel that didn?t take place. But after that the market really slowed down. I think it is hard to pinpoint a single factor. It is a combination of things. I think everyone is waiting, although, I?m not sure of what exactly they are waiting for. I don?t know if they waiting for direction from the government or for a bit more positive outlook on the global economic picture. But after talking to our retailers and my own team, I think customers tend to sit on their money, wait and watch.

Your sales declined 26% in May. What?s the outlook going ahead?

I think that is directly in line with the rest of the industry, there has definitely been a contraction in the passenger car market. I think why they have affected us more than others is that a lot of our volume comes from the segments that have been hit the hardest. The Mini B1, to use an industry term, where we have our Beat and Spark are heavily impacted by the downturn. The areas where we are not present ? like the B2 and MPV ? have seen a lot of growth. The good news for us is that the products that we are launching later this year are directly targeted at those segments. We feel absolutely confident that Enjoy is going to be a hit. It will be out in the fourth quarter this year from our plant in Baroda.

The government is talking of taxing diesel cars. How do you see such a move?

We have always been in favour of market driven price for diesel as well as petrol and what you have seen over the past two years is diesel prices have remained static and petrol has increased more or less in line with inflation.

Frankly, diesel cars, because they have a higher technical content, tend to cost more so they generate more excise for the government. I think it?s in the government?s interest to continue to stimulate sales of diesel cars. This is the worst possible time for the government to be putting restrictions on auto sales particularly on diesel cars which are, right now, enjoying success in the market because of their technical and efficiency advantages.

You are meeting the Karnataka chief minister during the investors meet. Are there are potential investments lined up?

No. We just want to have a discussion on how we are continuing to grow our capability in Bangalore. Our technical centre at Karnataka is now a centre of expertise for a number of specific areas. We have expanded the capability to support the launch of our products there and have just introduced a new development centre that is doing hardware development in power train, chassis and those areas. So, I would say, less than a very specific investment in bricks and mortar, it is a continued investment in our capability.

How do you plan to grow the centre?

If we look at this fiscal?s export value it is roughly around R2,100 crore. We expect to increase that to roughly around R2,600 crore in the next two-to-three years.