GM to stop selling cars in India but not pulling out
GM to stop selling cars in India but not pulling out
The decision was announced as part of a series of restructuring actions from the Detroit automaker on Thursday, and marks a significant blow to India’s strategy of encouraging domestic manufacturing.
GM says it would no longer market its Chevrolet brand — its only brand of cars marketed in India — despite India’s promise as a market set to overtake Japan as the world’s third largest in the next decade.
But it does not plan to leave India entirely.
It plans to keep operating its tech center in Bangalore and to refocus its India manufacturing operations by making one of its two assembly plants in India — the one at Talegaon, about 100 km southeast of Mumbai — into an export-only factory. It plans to sell the Halol plant in the western Gujarat state to Chinese joint venture partner SAIC Motor Corp.
“We are not giving up benefits India offers as a local cost manufacturing hub with an excellent supplier base which is extremely competitive,” Stefan Jacoby, GM’s chief of international operations, said in an interview.
GM’s exports from India, mainly to Mexico and Latin America, nearly doubled to 70,969 vehicles in the fiscal year than ended on March 31. The Talegaon plant has a capacity of 130,000 vehicles a year.
Jacoby said the move to turn the Talegaon assembly into an export-only plant will not impact GM Korea and its position as an export hub. India will export vehicles mostly to Mexico and South America, among other destinations, while GM Korea will ship Korean-made cars to North America, Southeast Asia, Australia and Pakistan.
Dan Ammann, GM’s global president, said the restructuring actions for India announced on Thursday in essence cancels “most” of the plan GM unveiled in 2015 to invest $1 billion in India to deploy newly-designed vehicle architecture as part of a Global Emerging Market (GEM) vehicle program, and build a new line of low-cost vehicles in India.
The decisions to significantly scale down GM’s operations in India are results of months of analysis over “where we are going to place our bets (globally) as a company,” Ammann said in an interview.
The move is the latest blow to Prime Minister Narendra Modi’s “Make in India initiative,” aimed at making the country a global manufacturing powerhouse.
Last year, Ford shelved plans to produce a new compact car family designed mainly for emerging markets. India and China had been slated to be the main manufacturing hubs for the new range that was set to begin production in 2018.
The auto sector is a major employment generator accounting for about 29 million direct and indirect jobs in India. Moreover, the $93 billion industry contributes 7.1 percent to the nation’s gross domestic product and almost 50 percent of India’s manufacturing output.
Ammann said GM looked at many options but determined that the investment originally planned for India would not deliver the kind of return other global opportunities offered.
GM plans to continue to work on the $5 billion GEM program, which GM is developing with SAIC Motor. Ammann said the program remains on track, even without India now, to account for about 2 million vehicles a year in global sales volume, mainly in Latin America, Mexico and China.
Despite being an early entrant, GM has struggled to boost its sales and market share in India in part because it has failed to launch low-cost yet feature-rich vehicles that Indian buyers prefer, according to analysts. Many of them also blame the high cost of maintaining and servicing Chevy cars for deterring cost-conscious buyers in India.
GM said in 2015 it aimed to double its India market share to around 3 percent or more by 2020. But its market share fell to below 1 percent in the year ended March 31 from 1.17 percent the previous year — even as India’s market grew 9 percent to climb above the 3 million vehicle level. GM’s volume in India fell by a fifth to 25,823 vehicles in the year ended March 31.
The GEM vehicle architecture, which is being engineered as an emerging-market platform technology for markets such as China, Brazil, Mexico and India, was envisioned to help GM come up with more cost-competitive cars. But for India, GEM was still too pricey a technology since it has been designed under GM’s global vehicle safety, performance and other standards.
Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO
- China is suing US and EU at WTO
- Kingdom warns new rules are concerning
The EU’s new rules against countries dumping cheap goods on its market got a rough ride at a World Trade Organization meeting, where China, Russia and Saudi Arabia led a chorus of disapproval, a trade official said on Thursday.
The EU, which is in a major dispute with China about the fairness of Chinese pricing, introduced rules last December that allow it to take into account “significant distortions” in prices caused by government intervention.
A Chinese trade official told the WTO’s anti-dumping committee that Beijing had deep concerns about the new methodology, saying it would damage the WTO’s anti-dumping system and increase uncertainty for exporters, an official who attended the meeting said.
China argued that the concept of “significant distortion” did not exist under WTO rules, and the EU should base its dumping investigations on domestic prices in countries of origin, such as China.
The EU reformed its rules in the hope they would allow it to keep shielding its markets from cheap Chinese imports while fending off a Chinese legal challenge at the WTO.
China said that when it joined the WTO in 2001, the other member countries agreed that after 15 years they would treat it as a market economy, taking its prices at face value.
But the US and the EU have refused, saying China still subsidises some industries, such as steel and aluminum, which have massive overcapacity and spew vast supplies onto the world market, making it impossible for others to compete.
China is suing both the US and the EU at the WTO to try to force them to change their rules.
Legal experts say the dispute is one of the most important in the 23-year history of the WTO, because it pits the major trading blocs against each other with fundamentally opposing views of how the global trade rules should work.
In the WTO committee meeting, Saudi Arabia said the new rules were very concerning, and it challenged the EU to explain how EU authorities could ensure a fair and objective assessment of “significant distortion.”
Russia said the EU rules violated the WTO rulebook and certain aspects were unclear and created great uncertainty for exporters. Bahrain, Argentina, Kazakhstan and Oman also expressed concerns.
But a US trade official said the discussion showed that appropriate tools were available within the WTO to address distortions affecting international trade.