General Motors in India
AP
General Motors Chairman Rick Wagoner, left, talks to Indian Prime Minister Manmohan Singh during a meeting in New Delhi, India. GM plans to ramp up production and sales in India.
updated 4/17/2007 10:12:40 AM ET 2007-04-17T14:12:40

General Motors plans to ramp up production and sales in India, one of the world’s fastest-growing auto markets, the company’s chairman said Tuesday as he introduced the Chevy Spark — a mini car — to Indian customers.

General Motors Corp. is also scaling up procurement of low-cost auto components from India to lower costs at its plants in other parts of the world, GM Chairman and Chief Executive Rick Wagoner said.

“It is time to redouble our efforts on manufacturing and marketing here,” Wagoner told a group of business leaders ahead of introducing the Spark.

India’s rapid economic growth over the past decade has boosted middle-class incomes and driven demand for cars.

Japanese and Korean car makers such as Suzuki Motor Corp. and Hyundai Motor Co. have done much better than their American counterparts with small and compact cars that dominate Indian roads. Both GM and Ford haven’t seen much success because of pricing.

GM hopes Spark will help change the course. With the base model priced at 309,000 rupees ($7,300), the car is compelling buy.

“This (the Spark) is a big part of our growth strategy here,” Wagoner said. “With this new product and the investments we are making, GM sales and market share will continue to grow.”

GM is building a new plant in western India to more than double its production to 225,000 units annually. That will make India GM’s third biggest production hub in Asia, after China and South Korea, with capacity of 850,000 units and 700,000 units respectively.

The Spark faces tough competition from the Hyundai-made Santro and Alto, and the Wagon R from Suzuki-controlled Maruti Udyog Ltd, India’s largest car maker.

Both Maruti and Hyundai have extensive network of sales and service centers and have much larger production capacity than what GM would have even a year from now.

But Wagoner said GM’s focus on India goes beyond market share here.

The company operates a research and development center in Bangalore, India’s technology hub, with about 800 engineers and 100 scientists.

“We are going to radically ramp up sourcing from India,” he said.

Nick Reilly, GM’s Asia-Pacific head, believes the company will make annual purchases worth $1 billion from Indian auto component manufacturers within 4 to 5 years.

Increasing demand from consumers across Asia will drive future global car sales, with the region accounting for 70 percent of the new global growth over the next decade, Wagoner said.

India is set to become the second fastest-growing automotive market after China, he said.

“It is also important that half of this country’s population ... are below 25,” Wagoner added. “That is a lot of potential for future car buyers.”

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