GM not willing to share production capacity in India, leaves Peugeot in a quandry

Tuesday 22 May 2012, 11:20 AM by

In spite of the global alliance between Peugeot and General Motors (GM), the two companies will not be sharing the production facilities in India. Previously, the former was considering using the latter's manufacturing plant in Halol, Gujarat to build its cars in the domestic market. However, Timothy E. Lee, the President of International Operations, GM, stated that the Indian division of the company does not have sufficient capacity to share production lines with its partner. Moreover, the American car maker will not be able to provide installed capacity to the French automotive major in the future either keeping in mind its future plans.

On this issue, Lee commented, “In our minds, we have great ambitious plans for country like India and if we sell in the numbers we are planning to, we are going to be pretty much full up.” As part of the international strategic alliance, the two companies agreed to share platforms as well as production potential and buy car parts together across the globe. However, GM will now be using the Talegaon unit to commence production of its new models, even though Peugeot was also rumoured to use the same facility to manufacture vehicles in India.

With production capacity of 1.4 lac vehicles, the Talegaon unit is presently being used to develop hatchbacks like Chevrolet Spark and Chevrolet Beat by GM. In 2011, the consolidated sales of these two cars stood at 79,000 units. Considering the same sales volumes for 2012 as well, the American car manufacturer will have spare capacity of just 61,000 vehicles for three upcoming vehicles, namely Sail hatchback, Sail sedan and Enjoy Multi Purpose Vehicle (MPV). It is said that these three models will be developed by the company at the Talegaon unit only.

In January 2012, French auto maker Peugeot declared that it will not go ahead with its plans to invest Rs. 4,500 crores in order to build a production unit at Sanand, Gujarat. It had stated that it was considering the option of using GM's plant in Halol in the same state to build its cars. The company has been unsuccessful in coming up with the requisite amount and sharing the plant seemed to be the best possible choice for it. However, GM's plans to not share the installed capacity in India will be a major setback to it and will compel it to reassess its future for the domestic market.

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