GM inaugurates its new Flexi-Engine Plant in Talegaon

When it comes to foreign car manufacturers foraying into India to expand their business, the first and most important step is achieving a degree of localization. And Karl Slym's (President and Managing Director, General Motors India) opening statement at the press conference announcing the inauguration of the new powertrain manufacturing plant in Talegaon is an indication of just that naked truth. He began by stating that, "The new engine plant is part of GM’s overall growth strategy, which is not about how we sell one more car tomorrow, it’s about looking to make sure we have laid the foundations to grow rock solidly over a prolonged period of time." 

GM has been in India for the past 14 years now, but it is only in the last seven that it has managed to establish a sounding presence when it started selling cars under its Chevrolet brand. Now that the brand has grown in India under our very own eyes, GM is now very categorically looking to further expand in India, but at the same time is also looking at cutting its overall costs to ensure higher profitability in its future operations here.  

With that ultimate goal in mind, GM has invested in excess of US$230 million (1029 crore) for the setup of its latest state-of-the-art powertrain facility, which was inaugurated on Friday 12th November. It has an initial annual production capacity of 160,000 engines and is designed to accommodate future expansion upto 140,000 engines giving GM a total volume potential of 3,00,000 at its newly opened engine plant. The new powertrain facility will produce engines upto to a 1.5 litre capacity for small passenger cars manufactured by GM in India. 

Buoyant about GM’s future growth in India with the inception of this new engine manufacturing facility, Karl Slym said, "The opening of our new facility will enable our company to become more competitive and keep up with the growing demand for our vehicles. GM India’s sales have grown significantly since we began rolling out our mini-cars, the Chevrolet Spark and Beat, at our Talegaon plant about two years back." 

After effects:

Localization is in a sense a well-paved highway that will take you more rapidly to your final destination, which is reducing costs. But, when you think about localization of this magnitude coming into force, the first question on our mind is will it make GM cars in India cheaper? Well, the answer to that isn't the most desired one, but it is the harsh reality behind running a successful car manufacturing business in India.

As Karl Slym put it, "Of course, the long term result of this plant will help us bring down our costs, which is why we want localization. But constructing the new engine plant did cost us $230 million, which will not me made up with the sale of one engine, so it's more of a long-term strategy to bring down imports and our overhead costs. Does this mean we can expect a cheaper Spark tomorrow? No, it doesn’t! It essentially means that we will now be able to suppress our uncontrollable costs like foreign exchange, logistics, import duties etc."

GM India's road ahead:

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GM is planning to launch a new diesel engine, which will be designed and manufactured at this very plant. If my guess is right this will be the very same engine that will find itself in the diesel variant of the Chevrolet Beat, that will be launched in the first half of 2011.

GM has also setup a new commercial vehicle business, which is not just looking at the vehicle requirements, but also GM India's network requirements. This will be 99 percent a separate network, which means there will be a separate place to buy a passenger car and a commercial vehicle.

The American car maker will also launch six new products in the next 24 months in India. Five of those will be from GM's new partner SAIC's portfolio and one from GM itself. Four of the six new products will be passenger cars (2 mid-size, 1 small, 1 SUV) and two will be commercial vehicles (1 Van, 1 Pick-up).

Finally, on the electric car technology front, GM has no plans to launch an electric vehicle in India next year, but simply plans to showcase one. This will be a mini-sized fully electric GM car that will be available for us only to see, while GM conducts market research and in-country testing with the car.