General Motors Co. pulls the plug on its sales operations in India and South Africa, the latest steps in its overarching agenda to maximize returns from fewer, more profitable markets. The Detroit automaker announced on Thursday it plans to withdraw the $1 billion investment to build a low-cost vehicle family in India. While at the same time, GM is investing about $600 million a year in efforts to transform mobility; develop autonomous vehicles and transportation services.
A Jagged Landscape in India and South Africa
It is increasingly frustrating to gain more acceptance in emerging markets. Last year, GM sold just 50,000 vehicles in India and South Africa combined. Its Detroit-based rival, Ford Motor Co. attributed its decline in India to short-term headwinds such as demonetization and the complex tax environment. Global auto industry leaders are finding it tough to compete with the larger domestic incumbents such as Mahindra & Mahindra Ltd, Maruti Suzuki India and Hyundai, all of whom have seen profits improve in the last couple of years.
It has been a bumpy year for the motor vehicle industry in South Africa, given the slowdown in the domestic economy, the increase in interest rates, the new vehicle production inflation, and low levels of consumer confidence.
Isuzu Takes over GM SA
In a separate move, GM plans to stop building Chevrolet brand vehicles in South Africa. It also plans to sell its South African factory to Japan’s Isuzu Motors Ltd, alongside a 30% stake it owns in a joint venture with Isuzu. In February, Isuzu agreed to buy out GM’s majority ownership stake in a JV in Kenya.
The market in both the countries is fragmented, and auto industry leaders barely see success unless they take a frugal approach to engineering.
GM also plans to lay off an undisclosed number of workers at its International Operations headquarters in Singapore.
Ever since Mary Barra took the leadership role in 2014, the auto industry leader has taken belligerent steps to narrow its focus on fewer, profitable markets. The GM CEO has ditched five international markets, including Russia, India, and Europe, to free up capital. Barra doesn’t buy the notion that emerging market is a requisite for bountiful moolah.
The $5 billion GEM program, which GM is developed with Shanghai Automotive Industries Corp. is on track to produce 2 million vehicles a year to sell in China, Latin America and Mexico.