General Motors to shut Halol plant, make Talegaon unit export hub for emerging markets

General Motors had earlier announced its plans of investing $5 billion in India, China, Mexico and Brazil, saying "one-fifth of that investment will be in India".

On Wednesday, the carmaker announced that it will be investing into India with the aim of developing the country into a manufacturing and export hub for emerging markets. 

The carmaker has two manufacturing units in the country -- one at Halol in Gujarat and the other one in Talegaon in Maharashtra.

General Motors entered into India by setting up the Halol plant in 1996. Today, it has an annual manufacturing capacity of 1,27,000 units, according to the company's website, and the company manufactures the Cruze, Enjoy, Tavera and assembles the Captiva CBU at the plant. 

"We want to have a sustainable, profitable business in India. So, we had to really do it differently (from how it was done in the past)... I think we are making the necessary changes in India for the long term with a business that has sustained profit," General Motors' CEO Mary Barra said.

As per the company's plans, production at the Halol plant will be discontinued by the second half of 2016, while the Talegaon plant in Maharashtra will be strengthened and will become an export hub. The move will affect 1,100 employees at the Halol plant.

The Talegaon plant has an annual capacity of manufacturing 1,65,000 units. The company also manufactures engines at the plant, with an annual capacity of 1,60,000 units.  

General Motors' India investment plan

General Motors will invest $1 billion in the next few years to turn operations in India into a new global auto manufacturing and export hub aimed at boosting sales in fast-growing emerging markets, top executives said on Wednesday.

The investment is part of GM's plan to invest $5 billion over several years to develop a global family of Chevrolet vehicles with Shanghai Automotive Industry Corp (SAIC), the state-owned Chinese automaker that is GM's primary partner in China.

GM Chief Executive Officer Mary Barra said at a briefing in New Delhi that investment in India was expected to create 12,000 jobs at the company and its suppliers in Asia's third-largest economy.

GM will also launch 10 new domestically manufactured vehicles in India over the next five years in a push to double its market share in the country by 2020, Stefan Jacoby, GM'schief of international operations, told a news conference.

GM sold 56,700 vehicles in India in 2014 and had a marketshare of 1.8%.

With India dominated by Japanese and Korean automakers like Suzuki Motor Corp and Hyundai Motor Co, western firms like GM, Ford Motor Co and Volkswagen AG have found it tough to ramp up domestic sales.

Export Hub

GM's decision to make India an export base mirrors similar moves by Ford and VW, which are ramping up exports from the country to take advantage of low labour costs and profit from economies of scale.

"With this investment we plan to tap India's potential as a market and as a low-cost manufacturing base for the future,"Jacoby told Reuters in an interview.

The move is also seen as likely to take some of the strain off GM's South Korea operation. The automaker's operation there has been a low-cost export hub for years, producing close to a fifth of its global output, but has been overshadowed by rising labour costs in recent years.

However, the Indian expansion doesn't herald a gradual moveaway from GM's use of South Korea as an export base, Jacoby said.

He said, South Korea will continue to be a manufacturing and export base for automobiles designed for mature and developed markets such as the United States and Europe, while India will likely be harnessed as an export base for emerging markets.

(With Reuters)