GM bleeds in Indian car market

The Indian subsidiary of US auto major General Motors(GM) has run up losses of Rs 746 crore in the last financial year, according to documents the company filed with the Registrar of Companies last week. It sold 1.1 lakh cars last year taking a Rs 67,600 loss on every car sold. GM entered India in 1995 and was one of the earliest global car companies to woo consumers post liberalisation. But its accumulated losses have since piled up to Rs 1,598 crore, making it one of the least profitable car companies in India. The losses suggest GM is yet to get its India strategy right after 18 years of trials in India and more than a few errors. Ford, its American peer, which entered India after GM,reported losses of Rs 140 crore in FY12 as against 107 crore in the previous year. It has invested $2bn, which includes a billion dollars in its Sanand plant.

In contrast, Hyundai, the only MNC car maker with sizeable exports and higher indigenisation levels, has seen profits grow from Rs 376 crore in fiscal 2010 to Rs 830 crore two years later. General Motors India’s sales are down 20% so far in FY13 and analysts expect the company to report higher losses this year. “The losses (this year) would have aggravated since volumes are falling sharply,” said Mahantesh Sabarad, analyst, at Fortune Financials. Another big loss this year could see General Motors India’s accumulated losses inch up close to about half a billion dollars. The company did not respond to a questionnaire emailed by ET. General Motors has so far invested over a billion dollars here, including $500 million in 2012 to expand the Talegaon plant from 140,000 to 160,000 units and engine capacity from 160,000 units to 300,000 units. But poor off take of its products has limited capacity utilisation to only 38%. Idle fixed assets and the interest burden on it is one reason for the mounting losses.

chevrolet beat

After starting out with the Opel brand, GM got some traction in the early-2000s when it launched the Optra sedan under the Chevrolet umbrella brand. The multi-utility vehicle Tavera followed a year later, and between 2006 and 2007, the UVA hatch, the Aveo and SRV sub-compacts and the mini Spark rolled out. By the end of the decade, when it launched its small car Beat, GM, with eight products at different price-points, had the widest portfolio among the multinationals. But it still hasn’t been able to hold its own in the Indian market. GM’s first batch of models in India, including Astra, Corsa and Optra, lacked a long term strategy and have since been phased out. Newer products have struggled with poor consumer offtake, frequent price cuts leading to a lack of consumer confidence and poor dealer loyalty. “GM has not been able to focus on building any particular brand and has not worked to develop a flagship model,” said BVR Subbu, an auto industry veteran who has worked with Tata Motors and Hyundai. Even Beat, its largest selling model, only has a 4-6% market share in its segment. “The problem lies with the Chevrolet brand which doesn’t have a connect with the consumer,” adds Hormazd Sorabjee, editor, Autocar India. “GM has compromised its brand by frequent price cuts over the last few years.”

-ET

+++

Share

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>