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What GM leaving India means for US automakers

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General Motors is pruning businesses that don’t make money.

The largest U.S. automaker has shed operations in India, Western Europe and Russia in recent years, as it tries to boost profitability and free up cash needed to invest in automated driving technology, electric cars and other mobility businesses such as ride-hailing, which stand to take a bite out of traditional car ownership.

It is a move that bears resemblance to the trimming other automakers are making as they confront tough choices about where to put their money as global auto sales plateau and companies reckon with cash-hungry investments in electric cars and autonomous driving.

GM’s exit from India in 2017 was especially notable, in part because the massive country has a rising economy and growing automotive market. It is also relatively close to China, another expanding market where the company has been quite successful.

GM opened two factories in the country and introduced a number of products tailored to the value-conscious Indian buyer. The Chevrolet Beat, for instance, could be bought with the smallest diesel engine available in India at the time.

In spite of these efforts, GM watched its share of customers shrink from 4.7% in 2010 to about 1% in 2016.

To be fair, the Indian market is not easy for many foreign automakers to navigate. Entrenched players like Suzuki, which controls 50% of the market, have carved out niches offering fuel-efficient vehicles at low prices, and have been able to build the dealer and service networks needed to serve the diverse population.

The move may have been a smart one. In the years since the automaker pulled out, the Indian market has slowed for the first time in years.

“We explored many options, but determined the increased investment originally planned for India would not deliver the returns of other significant global opportunities,” a GM spokesman told CNBC.

Yet GM could find itself trying to reenter the market if the opportunity is right. Automakers have been known to return to markets they have previously left.

Analysts expect the Indian economy to rebound in 2021, around the time India is projected to surpass Japan as the world’s third-largest auto market.



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