China's SAIC and GM form auto JV

Shanghai Automotive Industry Corporation Group (SAIC) and General Motors, US, today announced the formation of a 50:50 joint venture exclusively to cater to the Indian market and to South East Asian countries. The new company will be called General Motors SAIC Investment Ltd (GMSIL) and will be based in Hong Kong.

The JV’s equity base will be $100 million (Rs 460 crore). For the upcoming Indian operations, GM and SAIC announced a joint total investment of $650 million (Rs 2,990 crore) investment.

Based on the automotive industry’s long-term potential for growth in India, SAIC and GM have formulated a joint strategy for investment in the country. They will utilise GM’s two vehicle manufacturing facilities (at Talegaon near Pune and Halol near Baroda) and a powertrain facility in India, and GM’s nationwide distribution network in the formation of a new joint venture, said a press release by the company .

Small cars from Shanghai GM and mini-commercial vehicles from SAIC-GM-Wuling, SAIC and GM’s manufacturing joint ventures in China, will be produced and sold in India. These products will join GM’s global vehicles, allowing GM India to quickly add entries in growing market segments. The establishment of the India JV is expected to be finalised in the first quarter of 2010. GM believes the additional models and potential volume growth will result in the creation of more jobs in India.

GM has a domestic market share which is now less than four per cent. GM India’s production capacity, currently 60,000 units a year, will be increased to 250,000 units by 2012.

“The formation of this joint venture which we expect to be finalised in the next three months will help GM India take SAIC’s expertise in manufacturing cost-effective small cars and vans and use it to develop suitable products for the domestic market. The first offering from this partnership will be one-tonne passenger mini vans,” said P Balendran, director & vice president (corporate affairs) of GM India. Cars built at GM Indian facilities would also be exported.

Speaking from Shanghai, a SAIC spokesperson, Zhu Xiangjun, told Business Standard: “We hope to announce our product portfolio for the Indian market next year.”

SAIC, part of the SAIC Group, is China’s largest manufacturers of passenger cars, utility vans, and buses. The group also has extensive operations in auto ancillary manufacturing and is part-owned by the Chinese government. General Motors’ partnership with SAIC began 12 years ago. Apart from today’s new venture, GM has eight more JVs with SAIC in China.

SAIC’s portfolio of passenger vehicles in China ranges from low-cost small cars and multipurpose vehicles to expensive sedans. SAIC sells the Roewe brand of cars, which are broadly midsize luxury sedans, and a premium-end sports coupe under the MG brand. Under its partnership with GM, it manufactures and sells GM’s Buick, Cheverolet, Cadillac and Saab car brands, and with that under Volkswagen and Skoda, sells a complete range of cars and SUVs. SAIC also manufactures large commercial vehicles like buses.