General Motors still waiting for the right strategy in India

Thursday 14 March 2013, 12:03 PM by

The Indian division of General Motors (GM) reported a loss of Rs. 746 crore during the last financial year. Reportedly, the American auto maker delivered 1.1 lakh units during the period, which accumulated a loss of Rs. 67,600 on every car sold by the company. It must be noted that GM forayed in the Indian auto market somewhere in 1995 and was counted among those overseas auto makers who were known to entice the Indian buyers at the earliest, after liberalisation. However, since then, GM India has piled up a loss of up to Rs. 1,598 crore, which marked its presence among the least profitable auto makers of the country.

On this approach of American auto maker, industry experts believe that GM is yet to apply right strategy for the Indian market after 18 years of its unsuccessful trials in the country. Another indigenous auto maker, Ford, which arrived in the scenario post GM, also recorded a loss of Rs. 140 crore in the fiscal 2012 over Rs. 107 crore in the last financial year. According to reports, the auto maker invested around $ 2 billion, including the billion $ investment made in the Sanand unit.

So far, GM India has employed more than a billion $, including $ 500 million in the last year to increase the production at its Talegaon plant from 140000 to 160000. Following this investment, the company also increased the production of engines from 160000 to 300000 units. But, since the demand for its models is less in the country, GM India is only utilising 38 per cent of its actual production potential. Experts stated that the unused fixed assets and burden of interest are some of the key reasons for the mounting losses of American auto maker in India.

On the other hand, the South Korean auto major, Hyundai happens to be the only multinational, which has maintained a respectable amount of exports and advanced indigenisation levels in the Indian market. The car maker has witnessed a tremendous growth in its profits from Rs. 376 crore in financial year 2010 to Rs. 830 crore, two years down the line. However, so far in fiscal 2013, GM India has witnessed a slowdown of 20 per cent and industry experts are of a view that the auto maker will record even more losses by the end of this year.

Initially, the auto maker introduced Opel brand in the country, which got some traction during the early 2000. With this success, the Tavera Multi Utility Vehicle (MUV) was introduced a year later, which was then followed by the UVA hatchback, Aveo sedan and SRV sub-compact model between 2006 and 2007. By the end of decade, the auto maker offered small car Beat, and with 8 products in its domestic portfolio in different segments, it emerged with widest portfolio amid the multinationals present in the country. However, with so many experiments made by the auto maker, none of them helped it to garner a strong foothold in the Indian auto market. With this approach, a number of industry experts are of a view that GM needs to revive its Indian operations, which might turn the tides in its favour.

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