General Motors' New Strategy in India

Case Code: BSTR410 Case Length: 17 Pages Period: 1984-2011 Pub Date: 2012 Teaching Note: Not Available

Price: Rs.400 Organization: Hero Group, Honda Motor Company, Hero Honda Industry: Automobile Countries: India Themes: Joint Venture, Strategic Alliance

Abstract Case Intro 1 Case Intro 2 Excerpts

In January 2012, Lowell Paddock (Paddock) took over as President and Managing Director of General Motors India (GMI) from Karl Slym1 (Slym). A veteran at General Motors since 1992, Paddock had the difficult task of bolstering the presence of GM in the market and taking it through to the next phase of growth. Analysts felt that Paddock had a tough act to follow as his predecessor had helped GMI get a firm foothold in the Indian market after trailing for a long time. Earlier under Slym, GMI's Chevrolet Beat recorded a sales figure of 5,240 for the month of July 2011. This was the first time that any of GMI's models had crossed the 5,000 units per month mark in the Indian market.

Most of the increase in the Beat's sales was due to the introduction of a new diesel model into the market in July 2011. Another of GMI's latest models, the Chevrolet Cruze, which was released in India in October 2009, was also performing satisfactorily in the Indian market. Analysts said there was a clear indication that GM was improving its performance in India and its understanding of the Indian market after it had re-entered the Indian automobile market in 1994. GM entered the Indian market for the first time in 1928 but it had to leave in 1954 due to a change in the government's policy. After its re-entry, the global automobile behemoth struggled to establish itself and to compete against the Japanese and Korean automobile companies which were well entrenched in the Indian market.

Analysts said that the main reason for GMI's dismal performance was its failure to understand the Indian automobile market properly. The Indian automobile market was dominated by small cars which were cheaper and offered better fuel efficiency. Due to the low income levels in India, many people preferred small cars. Understanding the importance of small cars, GMI released its first small car, the Chevrolet Spark (Spark), in 2007 and the Chevrolet Beat (Beat) in January 2010. The Beat proved a success in the Indian market and its sales improved tremendously after the introduction of its diesel version in July 2011. GMI had plans to introduce new models into the Indian automobile market in 2012 and to upgrade some of its existing models to consolidate its position in the market. GMI wanted to use the partnership it had entered into with Shanghai Automotive Industry Corporation (SAIC) in December 2009 to expand its presence in India. GMI said it would release some of SAIC's car models in the Indian market. It hoped that SAIC's compact and cheap Chinese developed cars would increase its portfolio and help it in expanding in the Indian automobile market....

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