GM to launch first compact sedan in India as part of market share quest

By Aditi Shah

NEW DELHI (Reuters) - General Motors Co (GM) on Wednesday said it plans to build and sell its first compact sedan in India in 2017, entering the country's fastest-growing passenger car segment as part of efforts to double market share by the end of the decade.

The U.S. automaker said the Essentia falls under a strategy involving raising the proportion of parts bought locally as well as cost-cutting, to raise its share of India's market to around 3.6 percent, even as sales plummeted last year.

GM has struggled to grow in a market dominated by makers of smaller and cheaper cars by the likes of Maruti Suzuki India Ltd , Hyundai Motor Co and Honda Motor Co Ltd . Its pace of lineup and dealership expansion has also lagged.

Its India passenger car sales fell 38 percent in April-December to less than 25,000 vehicles. In contrast, low interest rates helped the market grow 11.5 percent, industry data showed, keeping it on track to be the third-largest by 2020 from fifth.

The Essentia "is coming in one of the sweet spots in the market and it will play an important role," said Stefan Jacoby, GM International president.

Compact sedans are less than four metres in length placing them in a favourable tax category, encouraging automakers to add models in a market long dominated by ultra-cheap hatchbacks. Volkswagen AG is aiming for late 2016 for its Ameo.

Moreover, GM plans to source locally as much as 80 percent of parts for its new car from a small proportion now for current cars, Jacoby said, bringing GM in line with global rivals which are likewise turning to local parts to reduce production costs.

GM's plans for the Essentia extend to Africa and Latin America. The automaker aims to more than double annual exports from India to 50,000 cars by the end of this year, from 21,000 last year.

"It is a perfect vehicle for other markets," said Jacoby.

(Reporting by Aditi Shah; Editing by Sumeet Chatterjee and Christopher Cushing)