General Motors (GM) today announced that it will stop selling cars in India entirely by the end of this year. However, the company isn't pulling out of the Indian market yet as it'll continue to focus on making cars for exports in India from its Talegaon plant in Maharashtra. The company will also continue to operate its technical centre in Bangalore in order to support its exports as well as international operations. The news, although huge, isn't really surprising and was on the cards for long. Only thing is that GM took a lot longer to realise that it had messed up its strategy to the point of no return in India.
Speaking about the decision, Deepesh Rathore, Director, Emerging Markets Automotive Advisors (EMMAAA), said “We were the only forecaster to say an year back that GM India will cease sales. Most of our partners refused to believe us!”
So how did one of the world's largest carmakers fail to even moderately succeed in a booming car market such as India?
What went so wrong that the market set to become the world's largest in within this decade couldn't provide enough volumes to GM? All this when companies smaller than GM, globally in size and way more smaller in terms of product portfolio are managing to grow in India.
One could argue that India is a fiercely competitive market for automakers and the price-sensitivity here doesn't leave much room for brand loyalty among consumers. These factors, however, are applicable to all carmakers and yet GM despite being one of the early global entrants in India has failed to make a mark in the country.
Here's what went wrong
General Motors started off in India way back in 1996 with the Opel brand and cars that were well-engineered but ahead of their time for India. Some launches such as the Vectra were totally unnecessary but later things improved with the launch of the Optra, a premium sedan by the standards of Indian market back in 2003. Essentially, a Daewoo Lacetti, the Optra was considered to be a premium car back then and the television commercials with a woman calling off her fast (the food one) after seeing the moon through the sunroof struck the right chords with the masses. The company did reasonably well thereafter and then launched the Optra SRV, a performance hatchback that had disappointing handling and lacked performance. In between there was the Chevrolet Forester too but it was too expensive and ahead of its time in India and hence didn't do well.
What followed thereafter was a series of wrong decisions on part of GM and and its surprisingly consistent ability to not understand the Indian market. Companies that entered later in India were understanding the consumer much better and quicker but GM somehow developed the knack to not acknowledge the obvious!
Talking about the reasons for GM India's failure, Rathore said “GM India has been a slow moving train wreck for quite some time. It is a matter of time when years of mis-management will get you even though you may have deep pockets.”
The company started launching SAIC, then known as Shanghai Automotive International Corporation (SAIC) cars in India. Between these launches the Beat too was launched and it did manage to sell in acceptable volumes but eventually got far behind the competition in terms of technology and features. The U-VA and Sail were actually the cars that partly drove the company's decline in India among other factors such as lack of enough appropriate models. SAIC cars were Chinese cars with the Bowtie logo on the grille and were being sold in hope that the logo will be enough to convince the consumer. By the time GM felt confident enough to sell these cars in India, unfortunately for them the market and the consumer had matured a lot more than they thought they understood. Competitors brought out smarter cars with more features at lucrative prices and as expected, they sold.
The Sail and U-VA on the other hand looked outdated even in the showroom and were down on features too. Just undercutting the price of similarly sized cars without an exciting design or features was no longer the mantra to sell cars in India but GM for some reason remained oblivious to this trend. The Cruze was the only good car on all grounds that the company sold in the last few years and I'm surprised the company didn't learn from its own product, if not from others. The Cruze was a genuinely good car with class-leading power, a dynamic design and features at par with the segment. Customers understood the same and bought it till the time competition once again overtook it and customers then had better options. The company at this time should have understood that products that suit consumer requirements will sell and those that are outdated (like the Sail and U-VA) simply won't. The company still persisted with these products instead of developing cars for India. Yes, there was the Trailblazer, a competent SUV but that was like the support of an inflatable raft for a sinking cruiseliner.
By the time they did start speaking about working on a new platform for emerging markets, things had gone down an abyss in India and one of the world's largest carmakers was relegated to a market share of under 1%! It couldn't have got more embarrassing for the management here and only built-up to today's decision.
All said and done, GM India had multiple chances to arrest its fall and it didn't really need to look far but that never happened apart from the exception of the Beat and Cruze for a while. GM's competitor Ford too proved that a company can sell cars in India only when they're made for the market. GM India on the other hand kept forcing incompetent products in the market at a time when the Indian consumer was partying with global carmakers offering maximum features at the lowest possible price. There simply was no way this poor management by GM India could've gone forever and finally the sales have been called off.
Today's announcement is an example of how even a huge company can fail by underestimating the buyer and that's exactly what GM India did all these years without even realising that they're headed on a downward spiral.
Note: Existing customers of GM India need not panic as the company has assured it will continue to support their customers with after sales support and all exiting warranties will continue to be honoured till the end of their due term.