GM and China's SAIC to Launch India Auto Venture

The initial focus is on selling small cars and mini-commercial vehicles.

General Motors and Shanghai Automotive Industry Corp. will expand their China partnership overseas starting with plans to tap India's burgeoning car market in a move analysts hailed as good for both sides.

The two companies, which dominate China, said on Dec. 5 they had set up a 50-50 joint venture aimed at expanding in emerging Asian markets with an initial focus on selling small cars and mini-commercial vehicles in India. GM and SAIC, which already have an established relationship in China, will invest a total $650 million in the Indian venture to exploit the country's "rapidly growing market", GM's executive vice president said.

"It seemed to us a sensible time and a big opportunity to deepen that relationship and broaden that relationship outside of China," Nick Reilly said. Reilly said GM would contribute about $300-350 million, including existing assets.

Small cars from Shanghai GM, the two companies' main joint venture in China, and mini-commercial vehicles from SAIC-GM-Wuling will be made and sold in India.

Analysts said the move by SAIC would mark a significant overseas expansion by a Chinese 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.

In a separate move, GM surrendered its majority holding in the two companies' China joint venture, selling a one percent stake to SAIC for $85 million, Reilly said, giving SAIC a 51% share of the operation.

GM is the biggest foreign automaker in China, with expected sales of at least 1.4 million vehicles in the country this year. SAIC is the top Chinese car manufacturer. It has recently been making major efforts to increase sales in India and plans to launch a small car.

China, the world's largest car market, saw vehicle sales soar 37.7% in the first 10 months of this year to 10.89 million units, official data shows, compared with a total of 9.4 million units in 2008.

Copyright Agence France-Presse, 2009

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