Daewoo-Gm Alliance Seen Flanking Maruti Udyog

The strategic alliance announ-ced yesterday between General Motors of the US and Daewoo Motor of South Korea could alter equations in the fiercely competitive Indian passenger car market, with the combined entity grabbing at least 40 per cent of the mid-size car segment.

As per 1997 figures, General Motors India and Daewoo Motors India have a combined marketshare of 40.9 per cent of the mid-size segment, which had volumes of 50,280 cars. In 1997, the marketshare of Daewoos Cielo dropped to 20.4 per cent from 36.8 per cent in the previous year, while the marketshare of GMs Opel Astra rose to 20.5 per cent from 7.7 per cent. The dominant player in the mid-size segment, Maruti Udyog, lost ground with its marketshare dropping to 37.9 per cent from 49 per cent.

 

A statement issued by the Daewoo group in Seoul yesterday said it had signed an MoU to hold discussions with GM on the possibility of cooperating on a number of business transactions, and added that co-production and co-sales of cars would be among areas to be discussed in detail this month. However, no concrete plans for any GM investments in Daewoo Motor were announced.

Even if GMs reported bid for a 50 per cent stake in Daewoo Motor goes through, it will not have much impact on the shareholding of Daewoo Motors India, since the Indian company is not a direct subsidiary of Daewoo Motor. Its parent company is Daewoo Corporation, which holds about 92 per cent in the Indian venture.

However, a GM acquisition could have a major impact on Daewoos future launch plans in India as Daewoo Motor, Korea, is the technical licensee of Daewoo Motor India. The Korean company not only controls the technology supply to Daewoo Motor India, but is also the arbiter of any decision on the models to be introduced by Daewoo Corporation in the country.

Daewoo Motor India executives confirmed that the GM move could affect the companys launch plans in the country. Efforts to contact GMs India representatives proved futile.

Industry analysts said it made sense for the global alliance to be extended to India, as GM could attack the high end while Daewoo could target the low end.

Daewoo, which plans to launch its 796cc DArts, targeted at the Maruti 800 segment, could complement GMs plans to launch the Corsa in the Zen segment.

GM operates a 51:49 joint venture with the C K Birla group in India, called General Motors India, which produces and sells the Opel Astra. GM has an installed capacity of 25,000 plus vehicles per annum at present, but has been producing 14,000 vehicles per annum operating in one shift.

The company sold 10,319 vehicles in 1997, up from 4,028 in the previous year. The company has 29 dealers countrywide.

Daewoo, on the other hand, has a capacity of 72,000 vehicles per annum, and plans to go up to 1.5 lakh vehicles per annum.