GM, the world's largest car maker, hopes to grow up with small cars in the Indian market.
General Motors seems to be the auto maker to watch out for in 2005. Having made a series of less-than-spectacular mid-size and luxury car launches since it rolled out the Opel Astra almost a decade ago, the company is now thinking small to make it big. Very soon, the new Chevrolet Aveo may come to a dealership near you, followed very shortly by the Chevrolet Spark, both made by GM in Korea. Both have proven themselves in the international markets.
GM is the world's largest auto company, and sells the second highest number of models globally after Toyota. But nearly all of them are mid-size and large vehicles. But in India, where sub-compacts and compacts rule the road, GM has been unable to capitalise on the booming Indian auto market, like Hyundai Motor, Maruti Udyog and Tata Motors have with their Santros, Altos and Indicas. Little wonder that the 96-year-old global leader controls only two per cent of the Indian car market, despite bringing in a range of vehicles during an eight-year presence.
This year, GM seems to have decided, that will change, courtesy Daewoo and Suzuki. Ever since it took over Korea's bankrupt Daewoo Motor to form the General Motors Daewoo Automotive Technology (GMDAT) in 2002, GM has been using the Korean company's portfolio of cars to launch small and entry level car models across the world under the Chevrolet brand. In India too, GM has been pushing Chevrolet as a value-for-money brand, while Opel has been placed in the premium bracket. GM's Chevrolet models Optra (formerly Daewoo's Nubira) and Tavera are cases in point.
Daewoo's 'B' class sub-compact Matiz was to be relaunched as the Chevrolet Spark in 2004 itself, but the plan came unstuck after the failure of GM's bid for Daewoo's Surajpur plant. The company has now shifted focus to the Aveo, showcased at the Berlin Auto Show in 2003 and launched in the US markets in early 2004.
But GM is still pursuing the Spark Project and is likely to expand the production capacity of its Halol plant in Gujarat by another 70,000 to 80,000 units a year to accommodate the proposed volume car. Following expansion, the plant's total capacity will be around 130,000 to 140,000 units per annum.
Daewoo's Kalos (also sold as Lanos in some markets) has been re-christened as the Chevrolet Aveo, and is likely to be launched in India this year. The car is made in a four-door, three-box format as well, but in India GM is likely to launch the five-door hatchback version, to compete against 'C' class cars like Hyundai Getz, Ford Fusion and the soon-to-be-launched Suzuki Swift.
Expected to be priced in the competitive Rs450,000 top Rs600,000 range, the Aveo is styled by Giorgetto Giugiaro's ItalDesign studios, manufactured in Bupyong, South Korea, and is similar in size to the Hyundai Accent.
The standard equipment on the model includes a 103 horsepower 1.6 litre four-cylinder engine, five-speed manual transmission, 14 inch tires, power steering, a tilt wheel, tachometer, intermittent wipers and split folding rear seatbacks. The higher-end versions have air conditioning, a CD player with MP3 playback, power windows, power door locks and remote entry. Four-speed automatic transmission, anti-lock brakes and a premium audio system come as options.
With interiors big enough to seat five adults, the car has a 60 / 40 tumble-over rear seat that creates additional cargo room. It also has an amazingly short turning circle - just 14 feet - ideal for congested Indian roads. The GM website describes the Aveo as the 'lowest-priced car in its class'. In the US, the Aveo is positioned as a fuel-efficient entry-level model ideal for college goers and older people, offering high maneuverability and ease of driving.
It is imperative for GM to have small car offerings in India, as the Corsa and the Optra have been facing competition from new launches like the Hyundai Getz and Ford Fusion. The soon to be launched Maruti Swift and Toyota Innova will only add to the threat. While Optra (762 sold in January 2005) and Tavera (1,824 sold in January 2005) have been reasonably successful, Corsa's sales (430 sold in January 2005) have stagnated, not going beyond the 8,000 mark.
GM says its Chevy Optra has a 24 per cent market share in its segment, with sales of 9,200 cars last year. In 2004, the company sold 9,200 Chevrolet Optras, 8,369 Opel Corsas and 8,417 units of Chevrolet Tavera (launched mid-2004), clocking a 73 per cent increase in sales to 26,166 units. In 2005, GMI expects to sell 38,000 units, a 45 per cent increase over 2004. In contrast, Hyundai Motor India sold 20,111 car units in the month of January 2005 alone while Maruti Udyog sold 48, 544 units in the same month. Clearly GMI is missing out on the volumes. Therefore the small car venture.
Phasing out Corsa
Bowing to a price-sensitive market, GM is scaling down Corsa production from 8,300 cars in 2004 to 8,000 in 2005, and will increase production of its bestselling Tavera. Company officials say that over the next year, the Corsa range will be phased out and the capacity released will be used to manufacture the Aveo, as fresh capacity is added. Till 2004, GM had invested Rs1,400 crore in India, including the doubling of its production capacity.
In India, 80 per cent of the auto market comprises small cars, though recently 'crossover' vehicles like the Hyundai Getz and Ford Fusion are increasing in popularity. Toyota is to launch its Innova ('C' category) and Daihatsu ('B' category) small cars in India. After Aveo, GM may roll out another executive mid-size car, Magnus, powered by a 2-litre engine.
Betting on Chevrolet
In India GM introduced the Chevrolet brand with the luxury sports utility vehicle (SUV) Forester. Thereafter, all the cars it has introduced into India are Chevys. Worldwide, GM has an impressive array of brands including Pontiac, Buick, Cadillac, Oldsmobile, GMC, Hummer, Saab, Holden, Opel and Vauxhall. Most of these are large size models with high fuel consumption, giving mileages in the range of 4 to 12 km per litre.
Contrast this to small but highly fuel-efficient Korean and Japanese cars, some of which give more than 18 km/litre, like the Matiz / Spark. The rising cost of fuel worldwide and the increasing awareness of environmental degradation has led to the rising popularity of small cars in Europe, as well as in countries like Canada, Australia and New Zealand. GM is now making good the gap in its portfolio, selling Daewoo's small car models in India, China, South Africa and Canada under the Chevrolet brand.
The brand that earlier represented premium elegance and style in models like the Corvette, is now increasingly being used for entry level models like the Aveo, Optra, Forester and Tavera in India; the Epica Lacetti, Magnus and Tacuma in Canada and the Spark in China. Europe, too, is soon to get its first taste of a Chevy with the introduction of a number of rebadged Daewoo models.