Interview with P.Balendran, Vice President (Corporate Affairs), General Motors India

Company Description: General Motors India has completed 14 years of operation in India. GM India started its journey in 1996 and now offers products under the Chevrolet brand, which was introduced in India in 2003.  Chevrolet had already emerged as one of the fastest growing automotive nameplates in India. GM India produces the Chevrolet Captiva, Chevrolet Optra, Chevrolet Cruze, Chevrolet Aveo, Chevrolet Aveo U-VA, Chevrolet Spark, Chevrolet Beat and Chevrolet Tavera for sale in India and operates state-of-the-art manufacturing facilities in Halol, Gujarat and in Talegaon, Maharashtra.

General Motors India’s Halol plant will soon be seeing a lot of action with manufacturing of light commercial vehicles. How are things progressing there?

The Halol plant is the mother plant of the company.  It started operations in July 1996 and the first car to be rolled out was the Opel Astra. That time the capacity of the plant was 12,000 units per annum. The capacity was gradually raised to 25,000 units, then to 60,000 and now we have gone to 85,000 units per annum. Now it is further getting expanded. The light commercial vehicles are to be rolled out from this plant. That means the capacity is going beyond 100,000 units per annum and the expansion work is in progress.

At the Talegaon plant we have a capacity of 140,000 units per annum. We commissioned the plant in September 2008. The Beat comes out from this plant. The engine plant has also come up in Talegaon. The capacity of the engine plant is 160,000 units and there is a provision to expand it by another 140,000 units. That means Talegaon itself can produce 300,000 units of cars and also 300,000 engines. As of today both the plants put together have a capacity of 2,25,000 units. We have already announced that in a time frame of two years we are planning to roll out six new vehicles. We will have at least three or four models of  light commercial vehicles. We are looking at a van which will come out at the end of this year. We are also looking at introducing a pick up like the Tata Ace. In addition to this we are also looking at coming out with a utility vehicle. So the work in is in progress. There is also a hatchback and a sedan coming.

With regard to your LCVs, have you decided on the engines and the other critical components?

As for the engines, we are in talks with our vendors. We should be able to close this pretty soon. The manufacturing experts are already in and they are in our plants and our offices. We are on the right track and if everything goes well our plan is to launch the first product under the joint venture by the end of this year. All these vehicles are going to be manufactured at our plants and the parts are going to be sourced also from India. In our case it is going the other way round. Normally, Chinese companies are manufacturing products and exporting to other countries. Here in our case it is happening in India. We might even look at exporting from here. All these parts are going to be locally sourced. We have already placed the orders with the vendors here and these are going to be manufactured at our plant. If we cannot produce a quality product, then who else would?

India is a very price sensitive market. If your product is stylish, performance-wise it is good and if it is fuel efficient it will sell and even today we are the fifth largest automobile manufacturer in India. We have come a long way. Once upon a time we used to sell 2,500 cars a year. Last year we crossed 100,000 units. While the industry grew by 31 per cent, we registered a growth of 59 per cent. The market is tough as of now. The Reserve Bank of India has again increased the repo and reverse repo rates which mean that the commercial banks have already announced increase in interest rates. We do not expect the market to perform like the way it did last year. But I think we will still be able to record double digit growth this year too.

Will the LCVs also carry the Chevy brand name?

Yes, for light commercial vehicles there could be a brand extension of Chevy. It is definitely going to be under the Chevy brand.

You recently unveiled an indigenously developed Smartech engine. Are more such engines in the pipeline?

We have commissioned our engine plant only in November 2010. The MoU was signed with the Maharashtra government only in August 2008.  In record time we got our engine plant commissioned. The Smartech engine which we launched recently is the one that is being put in the Beat LPG. The engine is getting rolled out from the Talegaon plant. First and foremost, this engine has been created at GM Technical Centre (GMTC) in Bangalore. The technical centre is a combination of engineering, R&D and design centre. In fact, the engine has been developed keeping in mind the local driving conditions and the quality of fuel in the country. Therefore we are quite confident that this engine will do a good job. More aluminium alloys have been used and hence it is lighter, is more fuel efficient and has a lot more attributes as well.

Tell us a bit more about the GM technical centre and the role it plays vis a vis the company’s global operations?

 The technical centre caters to local, regional and global procurement. The technical centre is a 100 per cent export oriented unit of General Motors Corporation. I am on the board of GMTC. The automatic transmission of the Cruze has been developed majorly at this centre. In fact GMTC contributed more than 80 per cent of this. As for the design centre we have around 70 people working there at the centre.

What about GM bringing in other brands besides Chevrolet?

The CBU duty is around 60 per cent. We want that duty to remain as well. If we reduce this CBU duty, India will become an import market. We have all invested a sizeable amount of money as far as our operations are concerned. If I look at any CBU programme, I should have the volume. Sooner or later if I go for an SKD or CKD operation I shall not be able to justify my investment if I do not have volumes. We are not looking at any CBU programme as of now. We have one CBU today, that is the Captiva. This vehicle is imported from GM Korea but at the same time we get the engineering validation done here. This validation is done by our engineers in Bangalore, Talegaon and Halol. We have showcased cars like the Camaro but that is all part of our brand building exercise.

What is your current market share in the passenger  vehicle market?

If you look at our overall market share it is around 4 per cent. But we have not been operating in all the segments. Even today 82 per cent of the total passenger vehicle market comprises mini or compact cars. We only managed to get an entry into this segment with the Spark. This was about two years back. But in two years time crossing one lakh mark and registering a growth of 59 per cent is a good achievement. We are going exceedingly well and we are on the right track. As far as the Cruze is concerned, it is the market leader there. It is a segment leader. When we launched the Cruze we told journalists that our intention is to sell 500 units a month. On an average we are selling more than 700 units a month. Also in the used car market we have 60 outlets for the Chevy OK used car programme. Last year, we set a target of 2,400 units and have already sold more than 4,000 units. It’s an amazing figure.

Did the launch of the Toyota Etios ruffle feathers at GM especially with its pricing?

This is one of the fastest growing markets in the world as of now after China. Everybody has got space. This is a very price sensitive market and if you have the right product at the right price and if you are able to provide the best of services, I do not think you are going to lag behind. You can definitely succeed in the market. The market is growing for various reasons. Lifestyles have changed, household incomes have gone up, easy financing options, and the availability of different options, all of these attribute to the growth of the market. It is not going to be limited to a Nano or an Alto or an Etios. As far as the Etios is concerned, I do not find it as a competition. We are doing exceedingly well as far as our products are concerned. All the OEMs have their own space in the market.

Are tier-II cities contributing to your increasing sales?

There was a time in earlier days a company’s 60 per cent car sales used to come from metro cities. Now the trend has completely changed. Around 60 per cent of sales now come from non-metros while metros contribute 40 per cent of total sales. Among the major metros we have Delhi, Mumbai, Kolkata and Chennai. In the next category we have Bangalore, Lucknow, Hyderabad, Ahmedabad, Pune etc. Then there is another category that includes places like Jaipur, Guwahati, Kanpur etc. In 2008 we used to have around 70 dealers across the country. As we speak we have now 239 sales point and 235 authorised service outlets. That means we are already covered in more than 135 cities. The government is also planning to open banks in unbanked areas that cover around 72,000 villages and that too by 2012. That means the rural market too has got a tremendous potential. In our case we have started a number of activities to generate volumes in the non-metros. For example, if I have a dealer in Meerut, then I shall ask him to conduct a road show in Hapur. The markets are looking quite good in non-metros now.

Will the LCVs be sold through separate dealerships by General Motors?

We have already set up a division to develop our dealerships for our LCVs. It’s going to be completely separate. But again, for example, if I have a car dealer in Hyderabad and if he is able to give me a dedicated facility for my LCVs and he has the experience and the drive, then we would definitely look at it.

You had recently announced GM sourcing engines from Sonalika for the Tavera. What is the status?

That we have already announced. It is on and that engine is for the Tavera. We have already signed the agreement and they are on the job and we intend to launch the Tavera with the Bharat Stage-IV  engine by June-July this year. The engine will come with some changes and will be manufactured in Hoshiarpur by Sonalika. 

India has a Comprehensive Economic Partnership Agreement with South Korea. GM has a plant in South Korea through the purchase of the erstwhile Daewoo plant. Now will the company be leveraging all this to its advantage?

As of today, India has got Free Trade Agreements (FTA) and Preferential Trade Agreements with 21 countries. In all these FTAs the automotive items have been kept in the negative list. But in the case of Thailand they have introduced something called the ‘Early Harvest Scheme’. They have identified certain products and duties on them would come down in a phased manner. For us it does not matter any way because we have high localisation content for our cars. For the Tavera it is 99 per cent. Even today the Bharat Stage-III engines are sourced from Avtec in Indore. We have invested more than US 1 billion in two of our car plants here in India. We have the GM Technical Centre and are employing close to 4,500 people.

Is it fair to say that GM started its innings in India with the wrong products?

When we entered India in 1994, we had to do so with a local partner as per the then prevailing automotive policy. The automatic approval route only came about in 2002. So when we came into India we tied up with Hindustan Motors. They were our 50 per cent partners. So you cannot say we made a mistake. They happened to be GM Corporation dealers around the time India became independent. It is not fair to say that we entered the market with a wrong product. It is not correct. In fact the Opel Astra did generate the numbers while Ford which launched the Escort, disappeared in no time. But the Astra continued to be bought by Indians. We became a 100 per cent subsidiary in 1999. That was the time we introduced the Opel Corsa. Let me also explain that when you are a 50 per cent partner and you want to introduce a product I may not be able to do it till my partner gives me concurrence. In 2003 we introduced the Chevrolet brand of cars. When we did this, we also got the Subaru product Forester. It also had its own run though it was a CBU programme. That was the first Chevy brand and later we introduced the Optra. Now Chevrolet is the fastest growing name plate in India. If you look at the brand score it is 26 now--A brand that was introduced only 2003 is now a force to be reckoned with.