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DETROIT — General Motors executives say they decided to end sales in India because they no longer saw a path to decent profits. But their pessimism about the world's second-most-populous country is more a product of GM's own missteps in India over more than two decades than the market's prospects.
Indeed, plenty of other global automakers — Hyundai Motor, Suzuki Motor, Honda Motor and Toyota Motor, to name a few — have done a better job reading the market and offering vehicles that match consumers' needs and desires. Ford Motor Co. has more than double the market share of GM. Even Fiat Chrysler Automobiles has found a way to sell Jeeps at high markups.
"We think they may have misfired on understanding the customer aspiration for Chevrolet, especially in the last five years," Puneet Gupta, IHS Markit's manager for South Asia automotive sales forecasting, wrote in an email.
GM's latest round of Indian product introductions had sparse amenities, Gupta said, and it had nothing to offer in two of the fastest-growing segments in the country: compact sedans and compact SUVs.
"India is a challenging market, and economies of scale are important to extract the advantages," Gupta said. "Players like Hyundai have been successful for close to two decades and have been profitable, as they have been using India as a global export hub and in parallel are reaping the benefits."
GM's performance in India, which IHS expects to become the fourth-largest vehicle market next year, had gone from mediocre to worse lately. Its market share fell from 4 percent in 2011 to less than 1 percent last year. In 2015, it proposed a $1 billion investment to help reverse its declining fortunes, but CEO Mary Barra and President Dan Ammann, who have been abandoning parts of the globe where big returns aren't on the horizon, ultimately decided GM had worked itself into such a disadvantage that India's potential was no longer worth chasing.?You can expect that what happened in China ... is going to happen in India,? said Carlos Ghosn, chairman of the Renault-Nissan Alliance. Nissan India inaugurated a new dealership in Bengaluru, India, in December, above.
GM's retreat from India contrasts with the aggressive approach of its Japanese rivals, which are counting on India for long-term growth and piling in with investments.
Suzuki grabbed an early lead on the global industry by teaming with its local partner Maruti more than two decades ago. Today, Maruti Suzuki is by far the country's biggest player, with a broad lineup, an extensive reach in rural markets and a separate premium retail channel with more than 250 outlets. Suzuki derives half of its global sales volume from India.
Other Japanese carmakers are rapidly playing catch-up. Nissan revived the defunct Datsun brand partly to target India with a new range of entry cars. Honda and Toyota devoted extensive r&d resources to developing low-cost cars for India, the Honda Brio and the Toyota Etios.
The newest showdown pits Toyota and Suzuki as teammates against Volkswagen and its new partner, Indian heavyweight Tata Motors. VW signed an accord with Tata in March to explore long-term cooperation, a deal that followed the breakdown of an earlier attempt to penetrate India by pairing with Suzuki.
Hyundai, which has achieved three consecutive years of rising sales, now ranks second among all automakers in India. It overtook Tata in 2014, when it shifted its focus from exporting to local sales and began expanding its lineup in India rapidly. But Hyundai's volume is still less than half of Suzuki's.
In February, Hyundai said it would bring at least 10 new vehicles to India, three of which would be in segments where the company doesn't currently compete.
India isn't a source of high-margin sales because most of the vehicles sold there are low-priced entry models. But the market is huge and growing quickly. It is also moving upscale, with growing demand for luxury brands in the wealthier urban centers. In March, Toyota launched its luxury Lexus brand in India, saying it will offer its flagship LS sedan and two hybrids.
"We are excited about what we can bring to the luxury market in India, where we see opportunities mapped to the remarkable growth the country is experiencing," Lexus India Senior Vice President Akitoshi Takemura said in a release at the time.
Through March, Indian light-vehicle sales climbed a robust 10 percent to 1.02 million vehicles, according to LMC Automotive, despite economic headwinds caused by a government crackdown on large cash transactions. That's healthy growth in a global landscape where the U.S. is largely seen as having peaked. LMC forecasts Indian light-vehicle sales to end 2017 up 8 percent at 3.61 million.Ford plans to begin selling the India-built EcoSport in the U.S. in early 2018.
'Very tough' market
The Renault-Nissan Alliance remains bullish on India — even as it works through its own challenges there. Mitsubishi, which became part of the alliance last year, also is counting on India to help spark a global rebound.
The key for the alliance in India is local manufacturing at a plant near the southern port city of Chennai that builds vehicles for local sale and for export to about 100 countries. The group originally invested about $700 million in the plant in 2010, but in 2013 expanded it at a cost of $320 million, boosting capacity to 480,000 vehicles a year. Last year, Chennai added production of the Datsun Redi-Go crossover.
The strategy has run into its share of challenges. Late last year, inventory backups prompted the plant to eliminate one of its three work shifts. And recently, the plant was involved in a public skirmish with state tax officials seeking repayment of incentive money the plant received.Ghosn: The Renault-Nissan Alliance is committed to India for the long haul.
Alliance Chairman Carlos Ghosn has repeatedly said the group is committed to India and has acknowledged that India demands unique solutions in products.
"The Indian market is very tough for the foreign carmaker because of the specificity of the product and the market," Ghosn said in a March interview with Autocar India magazine. "We are not limited to the short term. It is going to obviously mean mid or long term. Everybody [expects] India to be in the top three to four markets in the future. So, you can expect that what happened in China, where all the carmakers are present, is going to happen in India."
Ford keeps investing
Ford's sales in India have more than doubled in the past decade, though it described the country as a "significant challenge" in its 2016 annual report. Spokesman Kapil Sharma said Ford continues to assess its operations "to deliver sustainable profit over the long term."
"India remains important for us going forward," he wrote in an email. "However, our market performance and our financial performance have not met our expectations."
Ford's plans include increasing exports from the country. Last year, exports rose 53 percent to 151,638 vehicles, up from 99,143 in 2015. Ford's combined domestic sales and exports last year were 238,098 vehicles, up 35 percent from 2015.
Ford's exports from India are expected to continue to grow in the coming years, as the automaker plans to begin selling the India-built EcoSport subcompact crossover in the U.S. in early 2018. It will be the first Ford built in India and exported to the U.S.
Ford's market share in India peaked in 2011 at 2.9 percent — less than GM's at the time — before declining to 2.4 percent last year, according to the company.
GM said it will continue to use one of its two plants in India as a low-cost export hub for Latin America.
"In India, our exports have tripled over the past year, and this will remain our focus going forward," Stefan Jacoby, president of GM International Operations, said in a statement last month. "We determined that the increased investment required for an extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market."
Ford, meanwhile, is investing $195 million to build a Global Technology and Business Center in Chennai that's expected to open in 2019, serving as a hub for product development, mobility and business services for India and the world.
"The recent years for Ford have been encouraging with a succession of new product introductions, delivering a differentiated experience and challenging the myth on the high cost of ownership," Sharma said.
Jeep joins the fray
After years of delay, FCA made its first moves into India last year, when it began importing U.S.-made Jeep Grand Cherokees and Wranglers into the country and selling them at almost three times their domestic price. Jeep is using its two most iconic vehicles to compete head-to-head with Mercedes-Benz, Audi and Land Rover in the luxury SUV segment.
This year, Jeep will produce smaller, lower-cost SUVs at a new plant in Ranjangaon outside the western city of Pune — built as a joint venture with Tata Motors — beginning with the recently redesigned Compass and smaller Renegade. The plant will build right-hand-drive versions of the Compass and Renegade for export. A small A-segment Jeep, which would slot under the Renegade, remains under consideration and could also find its way to India.
India and China are key to FCA's plan to globalize Jeep and reach 2 million sales worldwide by the end of its five-year business plan in 2018. The automaker expects to produce as many as 500,000 Jeeps annually in India by the end of 2018.
"The heart of that market is still very, very low-priced, dominated by local manufacturers," Jeep brand head Mike Manley told Automotive News last year.
"Even when global manufacturers break into that marketplace, it is with their lowest-cost platforms. All the signs are that, at some stage, India is going to develop and develop strongly, which is why we need to be there."
Lindsay Chappell, Hans Greimel, Larry P. Vellequette and Michael Wayland contributed to this report.
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