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Why GM Failed In India

Why GM Failed In India


Over the last 20 years, the
Indian automotive market has grown from about 500,000 new passenger cars,
hatchbacks, sedans and utilities to about 3.5 million in 2018. The market has an expected compound annual
growth rate of about 5 to 6 percent over the next 10 years. But, some automakers have struggled
to make it work. Among them is General
Motors, the largest U.S. car company. GM stopped selling cars in
India in 2017 after years of declining market share. It’s a striking move for GM, which
in recent years has also closed shop in other regions around the
world, as leadership focuses on maximizing profits and making investments
in new technologies such as electric power trains
and mobility services. With a population of more than
1 billion people, India is becoming one of the world’s
largest automotive markets. The country is poised to surpass
Japan as the world’s third biggest new car market in 2021. So while there is ample
opportunity for automakers, the Indian landscape has been particularly difficult
to navigate, especially for American firms. GM watched its share
of the Indian market erode steadily over several years, bottoming out
at about one percent in 2016 just before the
automaker pulled out. So if the Indian market is
growing, why did GM struggle, especially when GM has been
so successful in China? To be fair, quite a few automakers
tend to have difficulty in the Indian market. First of all, India
is a massive country with a diverse population of roughly 1.3 billion people. India, I think, we are
definitely a complex market. The income levels
are quite heterogeneous. We are divided, actually into
urban India and rural India. The consumer requirements are actually
different even the needs are different in both these markets. There are a few criteria a
mass market automaker ought to meet. They are fuel efficiency, resale
value, proximity of service stations and the affordability of parts
and low servicing costs. I think first thing is price. We are a country with a
very low per capita income. Indians are very price sensitive. But price is not the only factor. So now the customer also needs
some more value, for example, with styling elements. And then, I think,
the consumer also wants a global brand. They want a
brand which is aspirational. The consumer wants an overall combination of
all P’s, you know it may be product, it may be
price, it may be positioning. Which makes the things
quite complicated for OEMs. These might seem pretty attainable,
but many automakers have struggled to meet these
in the country. There are a couple of companies who
have managed to crack that code and there are several more with shares
of the market ranging in size from small to smaller. By far, the most successful automaker
in India is the Japanese firm Suzuki, which alone owns
half the Indian market. Suzuki has enjoyed something of
a first mover advantage. It was the first major automaker to
enter India, and it did so through a joint venture
with Indian manufacturer Maruti. Suzuki also specializes in highly
fuel efficient vehicles, which are extremely important in
the Indian market. After Suzuki, Korean maker Hyundai is
the second largest with 16 percent of the Indian market. After that, Indian, Japanese and Korean
makers such as Honda, Tata, Kia and Mahindra all more or less
have equal degrees of market share. Kia in particular, is a relatively
late coming brand that has been able to succeed in India. I think an excellent example is
Kia Motors which recently entered, it was a new brand and
they gave a great proposition. They were in an SUV segment and
I think suddenly right from the month one, we saw a great success
for this OEM, in India. Then the remaining 10 percent of the
market is made up of others such as Ford, Renault, BMW and Nissan. Early on, GM entered the India market
with its Opel brand, a mass market brand GM had
owned in Europe. While Opel cars tended to be
affordable, they failed to resonate with Indian buyers. I think later on they realized that’s
not a brand which is really going to work well in India because
that was not a value proposition which they were offering
to their customers. But then GM introduced its Chevrolet
brand to the country, which brought it more success. It was a great success. They launched a few great
products like Chevrolet Cruze Chevrolet Beat. They had that start which
they were really looking forward. Despite these efforts, the automaker had
trouble taking share in the Indian market. It was the first
automaker to introduce a diesel fuel powered car of its size. At the time, the Chevrolet beat
was the smallest diesel powered car customers could buy in India. It was a strong proposition and
benefited from a government subsidy on diesel engines. But in the end, the
diesel Beat had few takers. The company may also have made a
misstep by trying to introduce a low-cost vehicle GM manufactured with
its Chinese partner SAIC called the Chevrolet Sail. Their plan got derailed with the
introduction of Sail because I think they underestimated the consumer aspiration
and then, I think, the decline started. GM also fell victim
to a kind of self-reinforcing cycle. One challenge it struggled with
was the lack of an adequate dealer and servicing network. More premium brands such as Mercedes
and BMW often attract customers with the means to travel
further for service and sales. But, mass market brands such as
GM’s Chevrolet are targeting middle class buyers who value convenience. Dealerships in India often sell a
single brand so GM’s low sales volumes meant a single dealer might sell
only a handful of cars in a month and risk taking losses on
the costs of running the business. In the end, such low market share
made it difficult for GM to justify maintaining a presence
in the country. The automaker officially stopped selling
cars in India on December 31, 2017. GM told CNBC it explored many
options for its India business, but ultimately withdrew after it
determined the increased investment originally planned for the country would
not deliver the returns of other global opportunities. It continues to operate services
for existing Chevrolet customers in the country. In September, the
automaker entered a long-term partnership with Tata Consultancy Services,
which will do engineering design for GM vehicles meant
for markets around the world. The move out of India was part
of a larger pullback GM has been making around the world as
it restructures its business. We’re seeing other automakers follow
suit as they’re pruning. They’re pruning the dead branches and
focusing on where they can be strong. For GM, this is a huge shift
because GM of old used to be all things to everyone everywhere. And, it has now decided that
is not the proper strategy. The automaker told CNBC if it doesn’t
see a clear path to leadership and long term sustained profits in
a particular market, it will look at opportunities to focus its resources
on areas that will lead to the greatest results. It added that this
is the same approach it has taken elsewhere. The automaker also sold its
European operations to French carmaker PSA in 2017. At the time it pulled out of India
GM had two factories there, one in the Gujarati city of Halol
and another in Talegaon. The Halol plant was acquired by
MG Motor, the once famed British brand now owned by Chinese
automaker SAIC Motor Corporation. GM has a joint venture with
SAIC to produce cars in China. Reports surfaced in November 2019 that
SAIC is also in talks to acquire GM’s Talegaon plant, along
with fellow Chinese automaker Great Wall. GM told CNBC it
is exploring strategic options for the plant. The move out of India was
a retreat for GM and for American auto industry. Ford is starting
to do the same. It’s trimming some
of its offerings. Global economy and global auto
market is slowing some. Certainly true here in the
US, it’s true in China. There’s just not enough money to
go around to every single market, too every single vehicle line. Look at Daimler and BMW,
they’ve announced major employee cuts. But in some ways it might
have been a shrewd move. The other thing that is happening
in the market that has never happened before is we are on the
verge of massive disruption of the industry. You know, we’re going to
have a future of electric vehicles, autonomous vehicles and new
ways to acquire personal transportation and now
mobility service. There’s all kinds of things. Nobody knows when that’s going to happen
or how it’s going to happen, but it’s requiring a
lot of investment. Companies like GM just can’t keep putting
a ton of money into the future as well as a ton
of money in today’s stuff. While analysts do expect the
Indian automotive market to continue growing in the foreseeable future, it
did hit a slump in 2019. Maruti Suzuki sales were growing
until February 2019, but have slipped every month, year
over year, until October. Suzuki said in November that the slowing
Indian market was one of the factors behind the company’s falling overall
sales and net income in its second fiscal quarter. So I think right now the
market is going through turmoil. Our economy is struggling and if
we only talk about the automotive market we are talking about a decline
of minus 14 percent in 2019 calendar year light vehicles. So obviously this year is the
kind of degrowth happening, which has not happened in last
two decades, in India. 2020, we are just talking about a
kind of a flat growth but then going forward, in 2021, ’22, ’23,
the assumption that our economy should be back, you know, the
GDP growth rate will start growing above seven percent. Indian automotive analysts note the country’s
auto industry has to contend with the relatively recent rise of
mobility services such as ride hailing. The potential of these
competing technologies is still unknown, but could affect how
interested in car ownership Indians remain in the future. In the end, GM did make some of
the right choices when trying to go into India. GM was right in
terms of localizing their products typically for the Indian market, making
it, in line with the taxation because they were able to save tax. But, at the end of their day, were
really not able to match with what the competitors were offering. If the Indian economy picks back up,
GM may find itself trying to profitably re-enter the country. GM’s rival Ford, which has been in
India since 1995, said in October 2019 it will create a new
joint venture with Indian manufacturer Mahindra, which Ford said will help
it develop new products faster and drive profitable growth.

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100 thoughts on “Why GM Failed In India

  1. Doesn't really explain why GM exited India
    All the reasons given or conditions stated were same for many other manufacturers as well

  2. GM is arrogant and failed to perform any competent market research.

    Compared to China, India has a tiny middle class and massive income inequality. The market exists only for luxury european cars at the top, and <$10k feature reduced Suzuki/M&M/Tata shitboxes at the bottom.

  3. Oil driven motors are in the way OUT.
    American gas guzzlers went the way of the dinosaurs.
    They rest are also on the downward slope to oblivion.
    Cleaner,safer,C free transport!!

  4. The graphical location of the manufacturing plants is wrong.

    @7:37

    Halol is Marked in Maharashtra.
    Talegaon is Marked in Gujarat.

    While in reality it's Vice versa.

  5. Being middle class in India means you probably have an income less than $10kpa. That is what is confusing for people who sell to the the middle class in the West. GM did not quit, with 1% they were kicked out.

  6. Location of Halol and Talegaon are interchanged… Really shameful for media like CNBC…. Seems like they did least research on this report… India is left driving country and they are showing footages of right side driving cars…

  7. GM failed because it tried to loot people of India in sales and services and people have become more wiser and intellectual with respect to case manufacturers. They know these companies are just here to take away every penny of their hard earned savings.

  8. India has a very good public transport network that makes car luxury or optional, with recent increase in middle class income, more middle class people are affording cars. USA forced car as mandatory once by not investing on public transportation. You could live without a car in India but not in America

  9. My friend just recently had to change fuel filter and fuel pump( 12-15-2019 ) on his car , guess where it is located?😨the fuel filter located on the rightside under the back passenger seat and the fuel pump located on the left side of the back passenger seat.., also needed to get special tools……..Never a gain G.M😎 go Toyota, Honda, Tesla

  10. "The competition was able to offer more competitive products".
    Hmmmm…that should come as a surprise to no one especially when it comes to the subcompact market.

  11. India people want stylish car with good price ,good mileage and cheap service cost and also market value of product after that they compare every brand then they buy car ☺️ accordingly Indians Toyota is best brand

  12. American companies will not do very good in India because they come with a mentality that if customers pay less then he should get less. One reason why Chinese companies grow so easily in India is because Chinese companies try their best to give as much as they can even at very low cost. Good example is smartphone. They have reduced the difference between a cheap and premium phone to a great degree.

  13. Obviously they will seek compensation 10x their losses…..from Iran & Russia while continuing to let indians, africans, spaniards, jamaicans, & any mediocre person anywhere that doesn't worry insecure Wester egos… to abuse & take lives of US citizens.

  14. That's because they haven't brought new and good cars.they haven't launched new models. I have a Chevy car, but the model was very old whereas it was 2 versions ahead in usa

  15. i have lived in India and I'm American. I'm not trying to be negative but the reality is this. India sucks and poverty is rampant and fuel is expensive as hell. Most people do not have cars and just ride scooters

  16. Indian people not like a budget vehicle. Like a luxury vehicle from GMC. Waiting for re-entry with luxury Segments. Now normally middle class people also buying 1.5 millions value cars.

  17. GM left India because their service centers were money making centers. I owned a cruze and the after sales service was pathetic. Since, very few owned GM vehicles, they'd charge a bomb for service. Pathetic…

  18. to be frank… even though Suzuki holds 50% of the share in India 90% of Indians still recognize the car as 'Maruthi Car'
    Maruthi Suzuki broke their partnership but still People call Suzuki showrooms as Maruthi show room…

  19. GM motors failure was totally a poor market research that they didn't took seriously.
    China is a good example who do a market research before starting a business anywhere in the world that is why Chinese market is successful in all over the world

  20. The truth is that after Chevrolet Beat they couldn't provide a world class product in India. Instead they brought in a Chinese brand called SAIL which had a very bad design and could not perform well in India. Chevy in the end had to shut down all operations in India.

  21. It's not just GM but all US products… the BIGGEST problem is not just the HIGH cost but also their low QUALITY and low RELIABILITY.
    Remember Swiss products commands a high cost but they are selling because of their high QUALITY and RELIABILITY.
    Try asking for a quality product Made in the USA and nobody will be able to name any.

  22. GM failed at everywhere bcoz they don't talk to there customer. its a fact, coz i have owned one Chevrolet. Service sucks..

  23. The problem with GM and all American companies is the "Shareholder" and Union benefits are  given priority over the customer draining capital away from being invested in quality product , and the market answers with dropping sales because of all their unreliability issues .

  24. Can't believe Cnbc named the location of Halol and Talegaon incorrectly! Please fact check before you animate! Smh🤦🏻‍♂️

  25. Half of the reason is GM isn't that great. The other half is nationalism—the same reason why even Tesla would do poorly there.

  26. The only cars India wants are those that can pile in the entire village. Their trains are an example of Village Packing.

  27. Oh CNBC you should do a piece on why America is leaving CNBC, because you’re clueless, GM didn’t leave India India left GM , that should’ve been the title.. and the reason for that was General Motors has the same problem you do they’re clueless about their own demise they build junk that fails quickly, in the US where there’s much more disposable income people will buy junk over and over because of loyalty & stupidity.
    There’s nothing in this video that anyone couldn’t figure out for themselves

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