After tasting success in the Chinese auto market, General Motors
(
GM
) and its Chinese partner SAIC Motor Corp now plan to turn around
the fortunes of its Indian unit, General Motors India, in which the
Chinese auto maker has a 50% stake. The companies plan to roll out
Sail
and a compact SUV named
Enjoy
before the end of the year.
Sail
was the highest selling vehicle in China in June and was offered in
diesel as well as petrol. Furthermore, GM is also expected to
bring a mini SUV called
Trax
and a low cost version of its entry level car
Spark
, although launch time-frame for these cars is not confirmed
yet.
The cheapest car offered by GM in India is the Chevrolet Spark,
which has done well but is still 30% more expensive than the
highest selling car, Maruti Alto. Small cars and mini-SUVs are
a hit with Indian consumers as they are seen as offering good value
i.e. fulfilling the purpose of transportation with basic
comfort. GM plans to discontinue its out-of-favor car
s UV-A, Aveo
and
Optra
after the introduction of its Sail range.
See full analysis for General Motors
A Tough Market to Crack
India is the sixth largest auto market in the world with
production expected to reach 4.3 million units in 2012. India's
highly price sensitive car market has often left European and
American automakers struggling with only the local and Japanese car
makers being able to crack this highly competitive
market. GM's market share in the country stands at a meager
4%. While auto sales in India are up 10% in the first half of
the year, GM's sales are down 11% in the same period.
Cars have to be designed specifically for India. Exporting the
successful models from international markets generally won't work
in this market. Certain standards regarding physical safety or
emissions are likely to be more stringent in the West and those
imported designs from the U.S. or Europe will be priced
higher. On the other hand, auto companies which have been
successful in Indian markets have built cars keeping Indian
consumers in mind i.e. a competitive price, a good mileage and a
low after-sales cost. Car companies often resort to
cost-cutting measures such as toning down the exterior or doing
away with a swanky dashboard with high-end features for a simple,
no frills interior.
Another aspect to consider is the Indian consumer's predilection
for diesel cars. Gasoline (or petrol as it is called in India) is
partially deregulated so the price is a function of international
market rates whereas diesel is heavily subsidized in the
country. In fact, GM's plant in the outskirts of Mumbai is the
world's first to produce petrol as well as diesel engines
simultaneously. So, in that regard, GM is doing well to not only
widen its product range but also offer customers the option of
petrol or diesel variant.
We currently have a
Trefis price estimate of $24.90 for General Motors's
stock
, which is about 10% more than the current market price.
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