GM announces exit from Indian domestic market on May 18

GM announces exit from Indian domestic market on May 18
GM announces exit from Indian domestic market on May 18

Recently General Motors (GM) announce that it is pulling out of selling cars in India and the current manufacturing plant would be used for exports. GM’s Chief Executive Officer Mary Barra is scrapping a $1 billion investment in India and halting sales of Chevrolet models there altogether. Currently GM has less than 1% of share in total car market. Remember GM came into India in 1994 before Toyota, Volkswagen and even before Hyundai. But GM was lost somewhere in crowed space So GM announces exit from India domestic market on May 18.

General Motors (GM) announced last month that it will stop the domestic sales of its cars in India, but will continue its export operations from the country. GM, that operates through the Chevrolet brand, however said that it will continue its domestic sales till December end this year. It further assured its customers that they will continue its after-sales operations for its existing customer base long after.

The announcement came on May 18, mid month and seems that the news of its exit from the Indian market has resulted in customers choice for Chevrolet cars. This was as the company sold the least number of cars in a year during May.

The company’s dealers are distraught. They warn of job losses (around 15,000) and potential losses of thousands of crores, mostly from around 18,000 GM vehicles in stock that will probably not find any buyers now.

Equally distraught are customers. Tanveer Alam, an Indore-based businessman, is worried about the resale value of his Chevrolet Cruze (automatic), a premium sedan, for which he paid Rs17.5 lakh only a month and half ago.

The suddenness of the announcement has taken everyone by surprise. According to a communication from GM Announces exit to its dealers, the company’s service arrangement with the latter will end on 31 December. Mint has seen a copy of the communication.

Mohit Arora, a partner at Singapore-based investment consulting firm, Mondriaan Group, said, “GM should have given a longer runway to its India operations. The transition cannot be so abrupt,” said Arora, citing the instance of Suzuki Motor Corp. which took three years to wind up its operations in Europe.

In an email response, a spokesperson at GM India said, “Last week’s announcement was a difficult one for GM Announces exit and a decision that was not taken lightly at all. It came after a lot of careful considerations and planning and after we assessed many different options.”

With monthly average sales of less than 900 vehicles, GM has been a laggard in the Indian market. The Tavera recall of 2013, when the company recalled 114,000 vehicles over problems related to emissions was a flashpoint. But hopes rose with the India visit of GM’s chief executive Mary Barra, in July 2015 during which she announced closing of company’s Halol, Gujarat facility, and a fresh investment of a billion dollars to breathe life into the company’s sputtering India operations.

GM dealers Mint spoke to are angry. They allege that executives at the India subsidiary were aware of the exit plan but kept them in the dark. “They kept giving us false assurances whenever we confronted them on the rumours,” one dealer who asked not to be identified claimed.

The GM India spokesperson said the final decision was made very recently (before last week’s announcement) and until then it proceeded with the previously stated plans. “As soon as the business decision was made, we updated all our stakeholders as early as we possibly could,” she said.

On 19 May, this dealer and many others received a non-disclosure agreement (NDA) from GM. Mint has a copy of this document that speaks of a “transition assistance programme” to prepare the dealers for expiration of retailer sales and service agreement on 31 December 2017.

Two dealers, including the one cited in the first instance, said they would not sign the agreement. They said the company’s dealers have asked FADA (the Federation of Automobile Dealers Associations) to intervene on their behalf.

GM Announces exit from India, spokesperson cited earlier said the company is meeting dealers individually and working through a plan that addresses their concerns while it fulfils obligations to its customers. “Given the commercial nature of these discussions, these discussion are confidential,” she said.

“How do they expect us to honour the service commitment when we are incurring such a huge loss?” a third dealer asked, speaking on condition of anonymity. Owners such as Alam fear being caught in the cross-fire between the company, which will soon leave and its aggrieved dealers.