SAIC pays $500 MN for GM India stake

Joint venture to now invest Rs 3,000 crore in India for manufacture and export.

Detroit-based General Motors, which entered into a 50:50 joint venture with China’s Shanghai Automotive Industry Corporation Group (SAIC) earlier this month to manufacture cars for both the Indian and export markets, has sold 50 per cent of its Indian operations to SAIC for $500 million (Rs 2,350 crore).

GM officials told journalists the company had invested $1 billion (Rs 4,700 crore) in India since beginning operations in 1994. “The $1 billion includes setting up the Talegaon vehicle and power train facilities, Halol car plant, the Gurgaon office and a small portion towards setting up the research and development facility (GM Technical Centre) in Bangalore. About half this amount has been sold to SAIC,” says P Balendran, director & vice-president (corporate affairs). However, the R&D centre will continue to remain a 100 per cent subsidiary of GM, USA, and has not been included in this transaction.

SAIC and GM-US formed a 50:50 joint venture investment company called General Motors SAIC Investment Ltd (GMSIL), which will be based in Hong Kong. The new company, with an equity base of $100 million (Rs 470 crore) will utilise GM’s Talegaon (in Maharashtra)  and Halol (in Gujarat) plants to first manufacture cars and utility vehicles for the domestic market. The new GMSIL has announced an investment of $650 million (Rs 3,055 crore) for the first operational phase in India.

“Under the new set-up, two representatives of SAIC will come on the board (of GM India) and will be based in the country,” says Balendran.

As part of this $650 million expansion, GM and SAIC will launch small cars and utility vehicles in the domestic market from the second half of 2011. These will be also exported to other parts of Asia. GM’s domestic market share is 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. 

All cars, even those contributed by SAIC, will be branded as Chevrolet, and utility vehicles contributed by SAIC by another name. “Besides, the dealerships for cars and utility vehicles will be separate and physically distinct,” says Balendran. In cars, GM SAIC will first launch an 800cc car  and an entry-level, mid-size sedan from Wuling’s stable. Wuling is the local partner in GM SAIC’s Chinese operations.

“In commercial vehicles, we are basically looking at three types. They are the small vans (like Wagon R), pick-up vans (like the Ace), and multi-purpose vehicles (Sumo) from the SAIC product line up,” says Balendran.