GM in India – The End of an Era (1996-2017)

Published On : 2017-05-23

General Motors’ decision to stop selling its vehicles in India hasn’t ruffled too many feathers. For the last two decades, the global automaker has been unsuccessfully trying to find a recipe that appeals to Indian carbuyers. Barring a few models, success has eluded it.

Its Talegaon plant in Maharashtra and Halol plant in Gujarat will remain operational. While Talegaon plant is being prepped up as an export hub, there is speculation that GM’s global JV Shanghai Automotive Industry Corporation of China may take over the Halol plant.

GM’s India Exit was Always on the Cards

GM debuted in India in 1996, but even after two decades, it remained a fringe player, holding just 1% market share. So what went wrong for one of the world’s largest automakers? Well, the failure of GM in India can be attributed to a slew of reasons, most notably, a failure to understand the aspirations and motivations of the average Indian buyer.

Stereotyping the Indian carbuyer as frugal and cost-sensitive is easy, but one needs to keep in mind that many mid-range compact SUVs are selling like hot cakes. The utility vehicle (UV) segment in India grew at nearly 30% in 2016-17 compared to less than 10% growth of the personal vehicle (PV) segment. Also, GM had two affordable cars in Beat and Spark, of which only the former gained moderate traction among buyers.

Understanding GM’s failure in India needs revisiting the history. The company entered India five years after the economy had been liberalised. Instead of launching its American models (Buick and Chevrolet), GM made a foray with the Opel Astra, a German model. The car was packed with features and commanded a hefty price tag, but it did well for itself in urban centres. However, when it was time to launch an economical hatchback that the country’s behemoth middle class could relate to, GM failed to capitalise on the opportunity. Hyundai, an upcoming carmaker, could see the gaps in supply and demand, and quickly moved around to launch its Santro range of affordable cars. Since then, Hyundai has never looked back, and today, it is the second largest player in the country.

Instead of taking the lead position in the Indian market in terms of innovation and new product launches, GM always played a catch-up game. The management has been caught napping at times, and has failed to capitalise on the success of some of its models – think Cruze and Tavera.

Although GM’s ride in India was less than spectacular, it had its moments. In 2010-11, it held a market share of over 4%, and India was high on the automaker’s priority list. However, on global front, its bankruptcy and bailout issues weighed down the operations. It was also involved in an emission scandal (made more famous by Volkswagen), further eroding its credibility among buyers. The writing on the wall became more pronounced for GM after the Sail debacle. Meanwhile, the company continued to trudge on the back of goodwill its Beat model had gained over the years. However, facelift after facelift did nothing to salvage even this model, as competitors unleashed superior, advanced products at affordable pricing. Renault could have met the same fate as GM, but it turned the tables with the launch of its bestselling Duster model. This compact hatchback not only saved the company, it also spawned a new era of compact SUVs in India. Renault leveraged upon the success of Duster with the launch of its hatchback Kwid, also known as ‘mini-Duster’ in the country.

In addition to poor product launches and marketing, the GM India management is also responsible for failing to succeed even after two decades of operations. India is poised to become the third largest auto market in the near future, and at a time, when global brands are working overtime to penetrate into the market, the exit of GM comes at an inopportune time.

GM and Chevy have a rich global legacy, and they will be missed by their Indian fans. But, an exit seems to be a pragmatic decision for the company at the moment.