GM and SAIC (Shanghai Automotive Industry Corporation Group) have formed a new joint venture in which each company holds an equal 50 percent stake. The new Hong Kong venture – General Motors SAIC Investment Limited – is meant to take advantage of the automotive industry’s long-term growth potential in India.

The newly-formed company will utilize GM’s two vehicle manufacturing plants and one powertrain facility in India that will produce small cars (from SAIC GM) and mini-commercial trucks (from SAIC-GM-Wuling). According to GM,

These products will join GM’s global vehicles, allowing GM India to quickly add entries in growing market segments.

These will be sold through GM’s distribution network in the country, that currently consists of 195 dealers and 198 service outlets.

Nick Reilly, president of GM’s International Operations (who will be making the move to head up GM Europe), had the following to say about the deal:

Over the past decade, SAIC and GM have created one of the world’s most successful automotive industry partnerships. Both companies felt this was the proper time to deepen cooperation beyond China’s borders in order to enhance our partnership as part of our individual companies’ long-term growth strategies.

GM expects the joint venture to be finalized in the first quarter of 2010 and believes that it will lead to more jobs being created in India.

SAIC and GM currently operate eight joint ventures in China and have been partners in the country since 1997. The tie-up is one of the most successful joint ventures between an American and Chinese company.

The GM Authority Take

Even though our article would suggest things are all nice and rosy, I would argue things aren’t really that great in reality: this new venture would give SAIC a 50 percent stake in GM’s operations in India while GM gets…. wait, GM doesn’t get anything in return here! GM’s cars will still be manufactured in India – as they are today – only now, GM will be sharing its profits with SAIC. It would be one thing if GM didn’t have any plants in India and was looking to enter the market on the cheap, with GM-SAIC producing the vehicles in China for export to India. That’s not the case here.

Perhaps GM received some money in exchange for SAIC’s stake in the new company, which it would use to pay off loans to the U.S. government? Maybe… but then again, GM’s entire press release doesn’t mention any financial figures related to the matter.

There is one thing: mini-commercial vehicles from SAIC-GM-Wuling that will be produced in India after the venture becomes official come Q1 2010. In fact, these trucks have been more successful in China than GM’s light vehicles. Check the numbers: through the end of November 2009, cumulative sales of the light trucks were 3,384,848, while total sales of cars were 2,973,411. Market trends tell us that India is currently hot for these types of vehicles for construction and maintenance work. So if this is the real reason for the new joint venture, how come Wuling – the third partner with SAIC And GM in the light truck venture – isn’t mentioned in the press release? Something’s not right here, but I can’t put my finger on it just yet. Stay tuned!

GM’s full press release is after the break, just in case you’re interested. (more…)