TALEGAON, India, Sept 5 (Reuters) - General Motors Co
began initial production of its first ever Chinese-designed car
for the Indian market this week, a major step for the U.S.
automaker as it tries to scale up in a market where foreign
companies have struggled.
India's love for the small car and its highly-competitive,
price-sensitive market has confounded many of the world's major
automakers, who wrestle with lacklustre market shares against
small car focused brands selling India-specific models.
The compact Sail, sold as a sedan and hatchback, will go on
sale next month as the first model designed by GM's Chinese
partner SAIC Motor Corp, the president of GM India
told Reuters in an interview at a factory in western India.
"What (SAIC) bring to us is more of a regional focus and
more of an emerging market focus," GM India's Lowell Paddock
said. "Sail is in some ways perhaps the first vehicle designed
with primarily Asian customer requirements."
SAIC holds a 50 percent stake in the Indian unit. A larger
passenger van from SAIC's stable will begin production in India
by the end of 2012.
Unlike in China, where GM and Volkswagen AG top
the passenger vehicle market with a combined 30 percent share,
all foreign automakers combined -- excluding Hyundai -- account
for less than 25 percent of the Indian market, despite billions
of dollars in investment and decades of toil.
Cars designed for customers and segments in other countries
have failed to capture the hearts of India's demanding car
buyers, leaving companies such as GM, Volkswagen and Ford
with forecourts filled with ill-suited models and falling
capacity utilisation at their plants.
GM needs a shot in the arm. Its India sales fell an annual
11 percent in the first six months of 2012, against a 10 percent
rise in overall car sales, according to data from the Society of
Indian Automobile Manufacturers.
The factory producing GM's Sail had previously been forced
into production shutdowns and downsized shifts as sales slump.
Paddock acknowledges the company has "underperformed".
"We've had an under-representation in the growing segments,"
he said. "As the market moved, we were left with a void."
SEEKING A GAME-CHANGER
When Paddock joined GM in 1992, India's roads were dominated
by small, low-powered Maruti Suzuki hatchbacks for the
simple reason that there was little else on offer.
Twenty years later, the same models still account for close
to half of India's new car purchases, with local titan Tata
Motors and Hyundai Motor together
accounting for almost 30 percent. Utility vehicle maker Mahindra
& Mahindra sells 10 percent of all the country's
Other foreign automakers have failed to match the approach
of Hyundai, which entered the country after GM but with an
aggressive small car focus and India-specific models.
"The Indian market has been incredibly difficult for us and
for everybody else," said Tim Lee, head of international
operations at GM. "We underperformed both from a share stand
point as well as a total volume standpoint."
"If we claim to be a global player then we need to be
successful (in India) and we have not been today," said Lee.
Almost all of GM's nine Indian models are based on vehicles
designed by South Korea's Daewoo, and cost more than their main
competitors. Its entry-level Spark is over 30 percent more
expensive than the Maruti Alto, India's biggest-selling car.
Its Aveo sedan and Aveo U-VA hatchback, based on Korean
designs and first launched without diesel models, mustered a
combined 3,328 sales in 2011. Toyota Motor Corp's
India-specific Etios and Liva -- direct competitors to the Aveos
in both segments -- sold a total of 63,500 in the same period.
"It's no good having a vast array of products that no-one is
going to buy," said Michael Boneham, president of Ford
India. Ford's sales in the first six months of 2012 also fell an
annual 11 percent, with Volkswagen's sales down 8 percent.
Ford, which has operated in India since 1996, underperformed
in its first decade selling European models such as the Escort
and Mondeo. It has recently seen sales jump with the Figo, its
first small car manufactured only in India.
"As a business, what we were doing was shipping vehicles
from Europe and trying to shoehorn them into the consumer here."
Boneham told Reuters. "Figo was a game-changer for us."
That is GM's hope for the Sail, China's biggest selling car
in June, and offered with both petrol and diesel engines.
GM sold 111,510 cars in India in 2011, less than a third of
its total installed capacity. Ford's sales accounted for just
over half of its total capacity in India last year, even as it
spends $1 billion on a new 240,000 vehicles-a-year factory.
Where GM and Ford have adapted to India's car market is in
diesel production, investing in plants to meet a surge in
popularity for the fuel due to government subsidies that make it
around 50 percent cheaper than petrol.
GM's powertrain facility in Talegaon, around 100 kilometres
outside Mumbai, is its first in the world to produce both petrol
and diesel engines simultaneously, the company says.
"In the past we did not have as broad a portfolio here, we
did not have, for example, a small vehicle with diesel, and we
underperformed because of that," said Paddock.
"But I think if we look at the opportunity that we have now,
with the right vehicles, the right powertrains, the right level
of tailoring... we think we have the right recipe."