Though not exactly a secret, it’s not widely-known that General Motors has been stumbling in India. This year to March, GM India has lost 38.5 billion rupees ($581 million), a rather concerning figure given that India is expected to become the world’s third-largest auto market by the year 2020. But The General is looking to turn around its performance in the country, targeting profitability over the next five years.
“But how?”, you might ask. Below, we outline the three primary initiatives General Motors is undertaking to bring its Indian operations into the black.
1. Investment & Growth
In July, General Motors announced plans to invest $1 billion in its Indian operations. The investment will go towards:
- Strengthening the Chevrolet brand by growing the dealer network in India (currently, GM only sells Chevrolet vehicles in India)
- Bringing 10 new vehicles to market over the next five years
- Building the new product locally with 70 percent of local parts compared to an amount much lower than today
In fact, GM is looking to these new domestically-made products to double its market share from the 1.8 percent market share it had in 2014.
2. Cost-Cutting
GM India is also instituting several cost-cutting measures.
It recently moved its local corporate headquarters in India to a different location in the same city, enabling it to save 50 percent in rent and office expenditures. The savings add up to $500,000 a year, according to GM India director, Arvind Saxena.
3. Export Hub
Making India an export hub of sorts is the third pillar of GM’s strategy to turn around its operations in the country. GM has already been exporting Indian-built vehicles to Chile, and recently began exporting vehicles to Mexico from India.
Exporting from India will help increase total annual exports for GM India for calendar year 2015 to 20,000 units, and GM expects to double that amount to over 40,000 units at the end of 2016.
In the future, it’s also possible that GM India will export vehicles to parts of north and South Africa, along with various countries in Asia as well.
“We need to have a more sustainable and committed business. It would take time and would be a combination of all the activities that we do,” says Saxena said. He said that GM will focus on exports until domestic sales come back around.
The GM Authority Take
At last, GM appears to be treating India as an important part of its business, rather than a poorly-managed offshoot far, far away from Detroit. It now has a new management team ready and capable of executing what appears to be a solid all-around strategy that will contribute to GM’s bottom line in a positive fashion.
Comments
Why does it take getting completely drubbed , wiped , embarassed by the competition to finally get religion ?? This market failure didn’t happen in one year but a festering sore for years . So who woke up , the bloated head office minions , I think not ,,,,,,, just maybe it was the janitors and maintenance staff there who , perhaps , were too disgusted and left on mass to work for Suzuki ? Somehow the message reached a GM employee in the Ivory Tower and someone sounded the alarm .
The competition sells hundreds of thousands of vehicles a year and GM a few thousand , please , how can anyone explain the lack of GM focus in this Indian marketplace , ,,,where are the marketing merchants , does GM have any , or are there just slews of bean counters , everywhere ???
To answer your question, who woke up was the new executive leadership team. Mary, Dan, and even Akerson had this on their radar. But given the current size of the market in India, it was deemed lower priority than most others.
The problem with India is that the market size is small and the profit margin is unbearably low. hence the low priority.
Suzuki makes considerable profit due to volume. The Indian market can be lucrative depending on product mix and reaching the Indian middle class. Buick/Opel/Vauxhall would be a great way too do this.
There its so much talk today about industry consolidation. I say GM should but into Suzuki. Doing so would make GM a leader in every important growth market plus allow GM to reduce reliance on its Chinese JV’s and Baujan sourced products for Africa.
I agree with you about the fact that GM have to stop its reliance on Baujun for North Africa, for example the new Optra doesn’t look like a Chevy and people here in Algeria liked the Korean made Chevrolet. Chevrolet was on the top three in sales volume between 2004 and 2008 but know it struggle to be in the top ten. I think that the Chevrolet Opel representative has a bad strategy.
Considerable profit? not so fast.
Maruti Suzuki made $370 million in profit for the entire year of 2013 in India. It is not considerable by any stretch. And that’s on revenue of $6.5 billion. The margin is low, the investment necessary is high, and the cost of doing business plain out sucks in India.
I’m all for an educated discussion. But let’s not get carried away with overstating reality.
One must take into account that Suzuki lacks scale which increases cost. In addition, Suzuki would serve as a great building block so that GM could shift focus away from value/entry level and internet growing Indian middle class with Vauxhall/Opel/Buick–a line up that would deliver considerably higher margins.
Higher margins per unit at a significantly lower volume. Would it make more than Chevy? I don’t know. But something tells me that it would be about even given that demand in India for upmarket/luxury/near luxury goods is very small/nascent right now.
Now, that’s not to say that I wouldn’t want to see Opel-Buick introduced in India. But I would also like to see Cadillac as well. All core GM brands (except for GMC) would do well to establish a presence *today* in what is sure to become a huge automotive market.
Love the math of some contributors here , GM India LOST 581 million last year alone and Suzuki only made profit of 370 million . The margin Suzuki made is low ?? What do expect in a highly populated poor country , high profits ?? Revenue sales growth is everything . Talk to your local supermarket grocery store manager who makes peanuts on much of his high turnover goods BUT turns over his stock so often , it enables him to be profitable in a highly competitive marketplace ! High sales is everything here , it most importantly brings you high Brand Awareness/popularity , brings you the most sought after PLUM , lots of happy thriving dealerships and more dealership inquiries/start up ops . Plus , it brings excitment and pride to Suzuki assembly workers , dealership employees and sales/service staff.
I am astounded by GM trumpeting cost cutting measures and specifically highliting It’s moving it’s corporate headquarters to a less costly location and probably a less visible location and saving 500,000. a year . This is a biggie ?? Plus 10 new models….last thought , will these models be similar what the people of India are buying in todays marketplace or will GM just sell what it wants to produce , telling the people what they should be buying ??