GM to invest $1 billion in India to boost exports

Wed Jul 29, 2015 9:40am EDT
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By Aditi Shah

NEW DELHI (Reuters) - General Motors Co (GM.N: Quote) said on Wednesday it will invest $1 billion over the next few years to turn India into a global export hub, even as it cuts production capacity in the country due to sluggish demand.

The Detroit carmaker, which has the capacity to produce more than 280,000 cars a year in India, will reduce this to 220,000 a year by 2025 as it stops making cars at one plant and modestly raises capacity at its second plant in the country.

"We need to have that kind of consolidation and rationalization to make sure we are here for the long term, that we have a sustainable business," CEO Mary Barra told reporters in New Delhi.

India's automobile market has been sluggish for the past few years, with annual sales of less than 3 million cars. But by 2020 analysts expect India to become the world's third-largest passenger vehicle market after China and the United States.

Even after two decades in India, GM's sales are falling and it is still losing money. GM lost 38.5 billion rupees ($604 million) in India in the year to March, a company filing with the corporate affairs ministry showed.

GM is confident of building a profitable business in India, Barra said, but did not give a timeline.

Western carmakers such as GM, Volkswagen AG VOWG_p.DE and Ford Motor Co (F.N: Quote) have struggled to increase sales in India, which is dominated by Japanese and Korean auto makers such as Suzuki Motor Corp (7269.T: Quote) and Hyundai Motor Co (005380.KS: Quote) that have a strong portfolio of low-priced, compact cars.

The recent Indian economic slowdown has left Western carmakers with excess production capacity.   Continued...

Employees are seen working through the doors of Chevrolet Beat cars on an assembly line at the General Motors plant in Talegaon, about 118 km (73 miles) from Mumbai September 3, 2012.  REUTERS/Danish Siddiqui