General Motors Co.’s (GM) India unit, which has failed to report a profit since it started operations in the country in 1997, on Monday unveiled a radical new plan to turn around the local unit by increasing its focus on selling cars in overseas markets.
The company, which exported at least 1,000 vehicles in 2014, aims to sell as many as 19,000 units in the current year and 40,000 in following 12 months, according to Arvind Saxena, president and managing director of General Motors India Pvt. Ltd. In comparison, its car sales in India are expected to either decline or remain at the current level. This is despite company’s plans to introduce two new models in the country—a premium sports utility vehicle (SUV) Trailblazer and a multi purpose vehicle (MPV) Spin.
GM will introduce Trailblazer in 2015. The model will be imported from Thailand as a complete built-up unit (CBU) and will be utilized to boost GM’s brand, which took a beating after the controversy over a massive recall of its vehicles in 2013. GM will start selling Spin in India in 2016 and is exploring possibilities to export the model to Mexico. “I’ve been working primarily on how do we restructure our business and how do we make our business far more sustainable—both for us and our dealers,” said Saxena, adding that his company has not firmed up product plans for the medium-to-long term. “We are really focusing on exports for last six months...now we’re fairly geared up to handle bigger volumes and markets.”
“We would be exporting to almost 30-plus markets worldwide, while the major export would be to Chile and Mexico,” said Saxena.
GM has taken a logical step after a long time in India, according to Deepesh Rathore, co-founder and director, Emerging Markets Automotive Advisors (EMMAAA)—a sector specific consulting firm. “Exports offer better margins and it will help them utilize their capacity,” Rathore said.
Exports from India help firms improve profitability and reduce operational costs by utilizing the production capacity. Currently, GM only uses 35% of its 280,000 annual installed capacity at its two plants in the country.
Saxena said that in 2015, the company will sell as many units as it sold last year but a person who is familiar with the company’s plans said GM has drastically reduced the sales target for domestic market for 2015 and 2016. “This year, they aim to sell 55,000 units while the target for 2016 is 50,000,” this person said requesting anonymity.
Sales in domestic market will rise substantially to 93,000 units in 2017 when the company is expected to introduce two models in volume segment, according to this person.
By then, India is expected to be the world’s third-largest market for automobiles, behind only China and the US. GM expects India to be world’s third-largest car market by 2020. Saxena said GM believes in India’s growth story and it is here for the long haul.
The company has outlined product quality as another area of importance in order to make its business more sustainable.
“We would also focus on quality, which would be done by us and we are already seeing some significant improvement in the way we track quality and from the dealer’s point of view, we are focusing on the consumer experience to impact our brand image more positively in the market,” he said.
In July 2013, GM India recalled as many as 114,000 vehicles that failed to meet emission norms. Mint first reported on 11 June 2013 that GM had halted the sale of its Tavera and Sail models over quality issues. On 26 July 2013, Mint reported that as many as 20 senior executives were sacked following the recall.
GM had then admitted to the government that its officials had fudged emission data related to the recalled Tavera vehicles. The then ministry of road transport and highways-appointed panel headed by Nitin Gokarn, chief executive of the National Automotive Testing and R&D Infrastructure Project, which submitted its report to the government on 21 October 2013 in which it termed the whole issue a “corporate fraud”.
On Monday, Saxena said his company is still in process of rectifying problems in the Taveras that it had recalled.
“We have identified and have replaced parts in at least 50% of the Taveras that we recalled. We are trying to identify others as the ownership of vehicles has changed hands multiple times.”
Source:livemint.com
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