• Automakers will combine manufacturing facilities and models in India and plan for other emerging markets
  • New 50-50 joint venture investment company formed

China's Shanghai Automotive Industry Corporation Group (SAIC) and General Motors Company on Friday said they would extend their cooperation in Asia to include model sharing and manufacturing facilities in India.

SAIC and GM, which currently operate eight joint ventures in China, have formed a new 50-50 joint venture investment company called General Motors SAIC Investment Limited. Based in Hong Kong, it will facilitate their expansion efforts, GM said in a statement. They also announced plans to combine resources to support expansion in emerging markets, beginning with India where GM is currently expanding its vehicle assembly and powertrain manufacturing capacity.

"Based on the automotive industry's long-term potential for growth in India, SAIC and GM have formulated a joint strategy for investment in the country," a company statement said.

"They will utilise GM's two vehicle manufacturing facilities and a powertrain facility in India and GM's nationwide distribution network in the formation of a new joint venture."

Small cars built by Shanghai GM and mini-commercial vehicles from SAIC-GM-Wuling, SAIC and GM's manufacturing joint ventures in China, will now also be produced and sold in India, joining other GM 'global vehicles' sold in the rapidly growing market where government incentives have recently spurred sales.

This will allow GM India "to quickly add entries in growing market segments", GM said.

The India joint venture should be set up in the first quarter of 2010.

"GM believes the additional models and potential volume growth will result in the creation of more jobs in India," the automaker added.

"Changes in the worldwide economy have created new opportunities in emerging markets," SAIC chairman Hu Maoyuan said in the statement.

"By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets."

"Over the past decade, SAIC and GM have created one of the world's most successful automotive industry partnerships," added GM executive vice president and president of GM International Operations, Nick Reilly.

"Both companies felt this was the proper time to deepen cooperation beyond China's borders in order to enhance our partnership as part of our individual companies' long-term growth strategies."

Both companies have also agreed that GM will transfer 1% of its stake in Shanghai GM to SAIC Motor to assist China's leading listed automotive company in consolidating Shanghai GM revenue into SAIC Motor, which, they pair said, "will provide investors a clear understanding of its business".

Shanghai GM management will continue to operate with the existing joint management structure and oversee operations of the joint venture, the statement added.

"SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets," SAIC chairman Hu Maoyuan said in the statement.

GM also agreed to transfer one percent of its stake in the two companies' China joint venture to SAIC, the statement said, giving China's largest carmaker a 51 percent share of the operation.

It was not immediately clear how the moves would affect GM's efforts to restructure following bankruptcy.

The US federal government has a 60 percent stake in GM after helping the car company emerge from a bankruptcy reorganisation in the summer.

"Both companies felt this was the proper time to deepen cooperation beyond China's borders ... as part of our individual companies' long-term growth strategies," Nick Reilly, GM's executive vice president, said in the statement.

Analysts said the move by SAIC would mark a significant overseas expansion by a Chinese vehicle manufacturer that would pit the two partners against established Indian carmakers Tata Motors and Maruti Suzuki.

"The foray into India is both a challenge and opportunity," Southwest Securities analyst Liu Feng told AFP. "It is a challenge because TATA and large carmakers are also experienced in making mini vehicles."

Tata dominates India's commercial vehicle market while Maruti Suzuki is the biggest seller of passenger cars.

Liu said the move could help protect SAIC from a possible future slowdown in the growth rates of the fast-expanding Chinese market.

"For SAIC, it is better to walk on two legs as the overseas market will [offset potentially weaker] domestic demand next year and the year after next."

SAIC and GM began cooperation in 1997, when the two automakers formed Shanghai GM and the Pan Asia Technical Automotive Center (PATAC) engineering and design joint venture.

PATAC has since played a key role in reengineering global products for both joint ventures in line with local preferences, regulations and driving conditions.

That was followed by the launch of six additional China joint ventures, including SAIC-GM-Wuling (China's top mini commercial vehicle maker); GMAC-SAIC Automotive Finance Company, China's first approved and operational automotive financing company; and the recently established Shanghai OnStar Telematics, which will provide a range of in-vehicle safety, security and communication services for some Shanghai GM models starting this month.

At the the end of November, Shanghai GM had sold 2,973,411 vehicles calendar year to date.

Since establishment in 2002, SAIC-GM-Wuling's domestic sales have more than quadrupled, with cumulative sales to the end of November 2009 totalling 3,384,848 units.

It has been China's leading producer of mini-commercial vehicles for the past three years.

SAIC Motor Corporation (SAIC Motor), formally known as Shanghai Automotive Co Ltd, went public on the Shanghai Stock Exchange in November 1997.
It was restructured in 2006. At 31 December, 2008, SAIC Motor owned total capital stock of 6.55bn shares, had consolidated assets of RMB107.86bn employed over 60,000 people. Its controlling shareholder is SAIC Group.

Reported last October: CHINA/INDIA: SAIC, GM, eye India opportunities

ANALYSIS: GM highlights strength of Asia-Pac operations

INDIA: GM India to stick with Chevrolet

INDIA: GM sets up new sales company

INDIA: Second GM plant opens