End of road for General Motors in India

Around 100 years after first entering Indian automobile market, the US-headquartered General Motors (GM) announced exiting the country's domestic car market.

Though the company will cease sales of Chevrolet vehicles in the India by the end of 2017, the after-sales service commitment to the existing buyers will continue to be honoured. The decision will lead to job losses for around 400 people, mainly from the Delhi centre where the company has its operations setup.

However, industry analysts claim that though it is very difficult to comment, Indian market cannot be ignored, and therefore, the company may decide to return in some years again with a new market strategy for the market, which the company lacked this time.

GM had also exited the market in the late 1950s, only to return in mid-1990s.

The company had earlier planned to invest $1 billion for developing of smaller, low-cost cars as a part of its plan to capture market share in one of the world's fastest-growing car markets. It had also announced plans to double its India market share to around 3% by the year 2020 from around under 2% then.

The move to exit is in contrast to the around half dozen other foreign companies knocking at Indian's door for entry in the next 3-4 years.

GM India's officials said that the company's manufacturing facility at Talegaon will continue as an export hub for Mexico and Central and South American markets. The company had last year exported over 70,000 units, which constituted around 90% of their total business from India. The company would like to further increase production from the facility.

According to Kaher Kazem, president and MD of GM India, though the company's exports have increased over past years, the increased investment required for extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market and this was the reason the company management decided to back out from India as part of its international restructuring measure.

Further, the company maintained that its exit from India is not related to any US government policy post the appointment of Donald Trump as President.

Kazem added that around 2,500 employees at the company's technology division in Bengaluru and another 2,500 at Talegaon plant will not be impacted due to the decision. The company also plans to sell the Halol plant in Gujarat to Chinese joint venture partner SAIC Motor Corp.

The Talegaon plant has a capacity of 130,000 vehicles a year. The company has over 150 dealerships in India and talks are on with them for the continuation of the after-sales services and compensation among other things.