China’s biggest automotive company, SAIC Motor Corporation is planning to buy General Motors’ factory in Gujarat. The deal is said to be in the advanced stages of negotiations.
Facing falling sales in India and a very poor market share, General Motors will be vacating its manufacturing plant in Halol, Gujarat by July and will be operating out of their plant in Talegaon, Maharashtra. The step is being taken to reduce costs as the accumulated losses have piled up to almost Rs. 4000 crores. But, vacating a plant wouldn’t do much to recover money as the investment in automotive plants is huge.
To recover the investment and to put the factory to good use, General Motors may soon sell the plant to SAIC. SAIC is China’s biggest automobile company and it bailed out GM when they were on the verge of bankruptcy in the USA. The Chinese auto major is planning on starting car production in India to save on costs. It is expected to start operations by contract manufacturing Chevrolet cars including the Cruze, Tavera and Enjoy which are currently made at the Gujarat plant.
The facility has a capacity of producing 1.1 lakh cars per annum and employs around 1100 employees. Looking at the sales figures of the above mentioned models for the past year, it is safe to say that the factory isn’t running even remotely close to its best. However, fixed costs are being incurred which is making the General Motors losses pile up. The sale of the plant is likely to reduce a huge amount from the consolidated losses.
SAIC isn’t dealing with GM for the first time though as it has a contract with them in China and also holds a small share in the company’s India operations. Also, GM isn’t the only company it deals with in China. It also has a contract with Volkswagen there. If the deal goes through, this will be the first Chinese auto giant to start manufacturing in India. This is a sign of changing times as everyone used to move to China for manufacturing and now a Chinese company is looking at India for manufacturing.