General Motors India Lowers Sales Forecasts, But Not Expectations
September 05, 2008
By Nick Kurczewski
KTALEGAON, INDIA - The next wave of small cars to come from General Motors could wear a "Made in India" label. GM India is rapidly expanding production capacity to build a new generation of small cars to meet consumer demand both at home and abroad. These Indian-built vehicles could arrive in U.S. showrooms as early as next year.
Located in the town of Talegaon, 110 miles southeast of Mumbai, the new factory will have an initial annual production capacity of 140,000 units. GM confirmed annual production at the $300 million dollar facility could be increased in the future. Combined with the 85,000-unit capacity at GM's other factory, in Halol, in the western state of Gujarat, GM India's annual output swells to 225,000 vehicles.
The factory in Halol currently builds no less than four (very different) Chevrolets: the Tavera SUV, Optra sedan, Aveo sedan and hatchback, plus the Spark city car. For now, the new Talegaon plant is scheduled to produce only the Chevy Spark. However, a GM India spokesperson told AutoObserver
the new-for-2009 Chevrolet Cruze compact sedan (debuting in October at the Paris auto show) is being considered for production in Talegaon. The Cruze goes on sale in the US next year, as a replacement for the aging Cobalt.
Commitment to India and Small Cars
This news follows last week's announcement that GM India will invest $200 million in an engine plant capable of producing 300,000 engines for domestic and export markets. General Motors said the new factories prove it is making a "clear commitment to India." That's truer in more ways than one, especially considering that the United States isn't the only market where consumers are buying more economical passenger cars instead of gas-swilling SUVs.
Early this week, General Motors India reported a modest 4.4-percent rise in August sales compared to the same month last year. This still is a far cry from recent boom years. The once red-hot Indian automobile market is cooling down due to inflation, high fuel costs and rising interest rates. "The [automobile] market has completely slowed down," said P. Balendran, GM India's vice president of corporate affairs. "Everybody has recorded negative growth."
In calendar year 2007, General Motors recorded sales growth of 74 percent. For 2008, these levels have been downgraded to single digit figures. But like the current sales triumph of economy cars stateside, the bright point for GM India has been the success of fuel-efficient small cars, particularly the tiny Chevy Spark.
The Spark itself is a homely jellybean-shaped hatchback. Its starting price is around $6,800 and base models don't offer power steering. Thankfully, given India's stifling summer temperatures, air conditioning is standard. Motivation is via a 63-horsepower 1.0-liter engine and manual transmission. The Spark isn't big on style or power, but the car's low price, tidy size and fuel economy have made it a hit in India - albeit one that, until now, was limited by production-capacity woes.
P. Balendran explained that before the opening of the Talegaon factory, monthly production of the Spark had been stuck at 2,000 units. That figure, he said, fell far short of meeting true demand for the car. With the new plant up and running, Balendran believes that production will finally meet this pent up demand.
"We will start with the Spark," said Balendran, regarding the first vehicle to be built at the new factory. When asked if other global GM vehicles be assembled there - like the Chevrolet Cruze that arrives in the U.S. for 2010 - Balendran said that it's under evaluation. He also confirmed that exports of Indian-built Sparks are being considered, but could not elaborate on the plans.
U.S. Sales for the Spark Unlikely
With the current sky-high demand for small cars in America, a subcompact like the Spark seems an obvious choice to bring stateside. According to data from Edmunds.com, the Korean-built Chevrolet Aveo showed a 16.8-percent sales increase in July of this year compared to July 2007. Even the Chevrolet Cobalt, a car in its fifth year of production, registered a solid 3.5 percent sales bump in July compared to last year.
But an American-market Spark still looks doubtful. During a conference call with automotive news blogs (including AutoObserver) Bob Lutz, General Motors' vice chairman in charge of product development, said that the new Spark - or Matiz, as it's known in Europe - does not meet U.S. safety requirements. First seen at the 2007 New York auto show, where it was called the Chevrolet Beat concept, the next-generation Spark/Matiz was praised for its chunky styling and high-tech, fuel-efficient 1.2-liter turbocharged engine.
According to Lutz, the upcoming Spark simply requires too much investment to re-engineer for U.S. regulations. High transportation costs could also limit Indian-built Sparks to closer export markets, like Asia and Europe. Whether or not it comes to the States, the new Spark is certain to have a profound impact on GM's fortunes when it goes on sale in 2010. And by expanding its factory presence and emphasizing fuel-efficient cars, GM India could play a much bigger role for the company as a hub of small car manufacturing and development.
PHOTO: New Chevy Spark in strong demand in India, but U.S. importation is unlikely.
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