General Motors has announced that its Indian subsidiary is to more than double production in the country in order to cope with demand. Impressive 2004 results in India have been a boon for GM after a troublesome few years, and the increasing demand for its cars in the region should help to counter stagnating sales in Europe.
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General Motors is to raise its annual production capacity to 60,000 units at its Gujarat plant in India, a figure that could be increased further if required. This decision to step up production comes in light of increased demand for GM’s cars in the Indian market, especially for the Chevrolet and Opel brands. The company’s sales in India grew by a massive 73% in 2004, selling over 26,000 cars. Although this was an encouraging result, it was slightly short of the 30,000 target.
The move follows the decisions of several other firms to expand production in the country also. Hyundai Motor is to build a second manufacturing site in India, which, when completed in 2007, will raise its annual manufacturing capacity in Chennai to 400,000. Renault, meanwhile, has teamed up with Mahindra & Mahindra to build the Logan sedan, while the Skoda arm of the Volkswagen group has also announced that it intends to almost double its production in the country.
The principal factor behind this trend has been the rise in Indians’ disposable income, making the country one of the fastest growing car markets in the world. In 2003, Indian car sales reached 650,000 units, growing to 800,000 units last year. Furthermore, as well as providing an increasingly lucrative domestic market, India is an ideal base from which companies can export to other countries in the region.
Increased sales in India and the southern Asian region as a whole should help GM to recover from a turbulent few years, and the company will be hoping it can maintain the kind of growth it has enjoyed there recently. GM stands to gain considerably if it can use its Asian businesses to overcome poor performance in the European market, which is beset with overcapacity, growing competition and falling prices. Expanding production in India should act as a useful complement to the company’s global restructuring programme, helping it secure its position as the world’s largest car manufacturer.
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By GlobalDataSOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
