Popular wisdom was that foreign companies have to tread carefully in China, lest they’ll be robbed blind of their vaunted intellectual property and thrown by the wayside. Now it has come to the total opposite: GM has made a mess out of India. And they turn to their old Chinese buddies at SAIC to help them out. Not just financially. Technologically. “GM hopes to take advantage of Shanghai Automotive Industry’s expertise in making small, low-cost cars to raise its share” in India, reports The Nikkei [sub].
India, a land of more than a billion people, is called “the next China” when it comes to cars. The Indian car market is ruled by a relative nobody in the business, Suzuki. Their bikes gave them brand awareness and street cred in a market where you trade up from two wheels to four wheels. GM has been dabbling in India for a while, but achieved only a meek 4.5 percent market share so far, a shadow of Suzuki’s 50 percent (or thereabouts.) Their factories in India are way underused.
Now GM is bulking up for a big push in India. And that’s what they need SAIC for. First of all, GM needs $250m to expand capacity at its Halol plant in the western state of Gujarat. That money comes from an investment company GM and SAIC started in Hong Kong last year. Officially, GM put its Indian assets into the company, and SAIC contributed cash. Unofficially, GM sold off half of their future business to SAIC for a handful of dollars. That entry was very valuable to SAIC. The Chinese always wanted to get into India. And the Indians always wanted to keep them out. GM became the Trojan horse of SAIC, and the cost of the ride was low.
Even more humiliating, GM is turning to Chinese technology to finally make its presence felt in India.
Once the capacity increase is completed by the end of next year, the Halol plant will begin making five new models. According to Karl Slym, chairman and CEO of GM’s Indian subsidiary, the new models come from SAIC. Details are not available yet, except that it will be two hatchbacks, one sedan. and two commercial vehicles.
Last year, GM sold 87,093 cars in India, up 41.6 percent, but still a far cry from what they could sell. Once the expansions are completed, GM (and SAIC) will have capacity for 240,000 cars in India. If GM learns quickly from SAIC how to make and sell cheap little cars demanded by emerging markets, they might be able to fill that capacity. But hey, those crafty Americans are quick studies. You show them a CAD drawing, and before you know it, they crank out the cars by the thousands.