GM turns to China to crack India's tough car market

Tue Sep 4, 2012 5:05pm EDT
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By Henry Foy

TALEGAON, India (Reuters) - General Motors Co (GM.N: Quote) 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 lackluster 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 (600104.SS: Quote), 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 (VOWG_p.DE: Quote) 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 (F.N: Quote) with forecourts filled with ill-suited models and falling capacity utilization 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.   Continued...

The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan in this file photograph taken August 25, 2009. REUTERS/Jeff Kowalsky/Files