General Motors and Shanghai Automotive Industry Corp on Friday announced plans to expand their China partnership overseas starting with a venture to tap India’s burgeoning car market.
The two companies said they had set up a 50-50 joint venture aimed at expanding in emerging Asia markets with an initial focus on selling small cars and mini-commercial vehicles in India, the two companies said Friday.
The two partners, who already have an established relationship in China, will draw on the troubled US carmaker’s existing presence in India to exploit that country’s “long-term potential”, a statement said.
“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,” said Liu Feng, an analyst with Southwest Securities.
“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 China’s fast-expanding 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.”
GM has recently been making major efforts to increase sales in India and plans to launch a small car.
