GM, China's SAIC in $650m JV to sell cars in India

(chinatrucks.com, Dec.7, 2009)General Motors and its Chinese joint venture partner SAIC on Friday unveiled a new alliance for India that will sell small cars and light  trucks in the world's fastest growing car market after China.

The 50:50 joint venture is based in Hong Kong, said Karl Slym, managing director of GM India. "Both partners have put in $50 million as the opening input in the JV. The business model is to have joint ventures in the Asia Pacific. The first of those will be India, sometime in early 2010,"he said.

"Since the JV is a 50:50 alliance, GM India will be 50% owned by SAIC,"Mr Slym said. The deal includes GM India's factories in Halol and Talegaon, but not the R&D centre in Bangalore.

GM executive vice-president Nick Reilly said the total investment in the India venture is expected to be over $650 million. GM was contributing half in the form of factories and a distribution network in India and SAIC would provide the rest, he said, though he declined to say whether that would be cash or other assets.

While the alliance will give China's No. 1 carmaker a foothold in India, it will help GM India garner a larger share in the country's market for small cars, which is dominated by Maruti Suzuki and Hyundai Motors India.
ET had reported on the GM India-SAIC tie-up in its October 15 edition.

The GM-SAIC JV will support GM India's finance requirements in future, but "not necessarily the $200 million it needs for its engine and transmission plant”, Mr Slym said.

Under the new arrangement, GM India will be able to pick models from GM's global portfolio and SAIC's range. It will produce small cars from the SAIC stable and light trucks from the Wuling range, another of GM's Chinese joint ventures with SAIC.

When it finally happens, SAIC's 50% stake in GM India will make it the first big Chinese firm to enter the Indian automobile market. SAIC has been keen on establishing a global presence. In 2004 it took over the ailing Korean company Ssangyong. Three years later it took over Nanjing Automobile, which owns the British brand MG Rover.

The alliance will also help GM India, which sells small cars such as the Aveo-Uva, Spark and the soon-to-be launched Beat, to source cheap components from China. It will also be able to enter the high-growth light truck market with SAIC's Wuling range of trucks.

The new alliance and its Indian angle also augurs well for GM's three-way partnership in a mini-van joint venture with SAIC in China. GM owns about a third of the SAIC-GM-Wuling Automobile while SAIC owns 50% stake in the company. SAIC may have leveraged its equation with GM in China for a foothold in India, said an analyst with a Delhi-based MNC consultancy.

"While the alliance will also solve any finance worries that GM India may have, it will give SAIC the chance to dip into the alliance that GM India has been inking on its own. like the one with electric car maker Reva,"he said.

"GM-SAIC tie up follows the announcement of GM-REVA collaboration for the introduction of electric vehicles to the market. These types of tieups in the changing business environment will help GM India to introduce new and exciting products and give wider choice to the Indian customers in different segments,"GM India said in a statement.

Views:0