By on October 17, 2012

 ”It’s too early to say for sure whether GM will purchase the controlling stake in HKJV, and thereby regain full control of its India business. It is unlikely that SAIC will relinquish its grip on India, just because it suddenly can’t service the capital requirements of the HKJV. Possibly, more information will become available when GM files its Q3 paperwork, or possibly later.”

As it turns out, they did.

The HKJV we refer to above is what’s known widely as General Motors India. Originally a 50-50 JV between GM and SAIC, the HKJV was established in 2009. According to Reuters, the post-bankruptcy initiative saw GM contribute

“…two assembly plants, [an] engine plant and sales network in the Indian partnership, while SAIC contributed 23.5 billion rupees. At the time of the deal, GM said SAIC’s money would allow the venture to market more products in India, particularly small cars and ultra-cheap micro minivans and buses that GM makes with two Chinese partners.”

Our own Tyler Vandermeulen, in his investigation of GM’s finances, found this nugget in GM’s 10-Q filing.

‘We were informed of SAIC-HK’s intent to exercise its right to not participate in future capital injections in HKJV. If this occurs we plan to settle the promissory note in the three months ending September 30, 2012 and provide an additional equity investment of $125 million into HKJV. As a result SAIC-HK’s interest in HKJV would be diluted from 50% to 9%. We also anticipate that the shareholders agreement would be amended such that we obtain control of and consolidate HKJV.’

Such an event has now come to pass, and GM now holds a 93 percent stake in the operation, and the first fruit of the JV, the Chevrolet Sail, is expected to launch in November, followed by the Enjoy utility vehicle. The Enjoy is based on an SAIC vehicle badged as a Wuling in China. The terms of the SAIC-GM deal were not disclosed. Based on Vandermeulen’s assesment, the deal will presumably cost GM the $125 million cited above.

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8 Comments on “GM Buys Indian JV Stake From SAIC, Estimated Cost Pegged at $125 Million...”


  • avatar
    th009

    At $125M it seems like a bargain and a good risk. Now the question will be whether GM India can execute and make something of it.

  • avatar
    icemilkcoffee

    Question is why is SAIC ditching this Indian market? What are they seeing that GM is not seeing?

    • 0 avatar
      Monty

      Maybe the question is: “…why is SAIC ditching this Indian market? What does GM see that SAIC is not seeing?”

      The Indian market may become GM’s next big growth area. People can denigrate “Government” Motors all they want to, but there are some very shrewd and competent employees in GM, especially, it seems, in the Asian divisions.

      SAIC may regret this move in a few years.

    • 0 avatar
      ranwhenparked

      I believe the original deal gave GM the right to buy back it’s stake under certain conditions, so SAIC might not have had a choice. This transaction would have been carried out under Indian and Hong Kong law, not mainland Chinese law, so they would have been compelled to honor the contract.

  • avatar
    L'avventura

    SAIC’s expansion plans were to sell Chinese-made vehicles, like the Sail, across Asia. SAIC had big hopes in South East Asia in particular as the ASEAN–China Free Trade Area (ACFTA)has just kicked in (full-effect in 2015).

    Chinese automakers planned on having affordable Chinese-made cars flood emerging Asian markets.

    This hasn’t happened as the Japanese have gotten tight stranglehold on that market with even cheaper Thai/Indonesian/Vietnamese domestic production. Now it seems ACFTA will play against the Chinese automakers, and we’re seeing SAIC retreat from those markets for the time being.

    For GM, we’re seeing a decoupling of GM-SAIC strategy for India. GM has been in the Indian market for 16 years, and they’ve been a mere fringe player. Their highest selling model is the Indian-made Chevy Beat (Spark). Continual importation of Chinese SAIC-made cars is not economically feasible over the long-term due to the tariff walls, higher wage, and the yuan inevitably appreciating.

    Likely GM will expand Indian production to boost sales and shift-away from a SAIC-centric expansion in Asia.

  • avatar
    acuraandy

    Hey India, as a US taxpayer and one who got screwed of the $8k ‘first-time homebuyer’ tax credit because an INDIAN COMPANY HAD THE TITLE TO MY HOUSE at closing and missed said credit that would’ve secured my family’s future! by 25 days…..

    YOU’RE WELCOME.

  • avatar
    Trail Rated

    Good Riddance.

    Today is the 50th anniversary of the 1962 Chinese attack on Ladakh and Tawang.

    I’m not sure how kindly Indian buyers will take to Chevrolet for trying to pawn off a rebadged Wuling, whatever that is. The Sail though does seem to fill a void.


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