I believe the Sail will be a game-changer: Lowell Paddock
Though General Motors may pip Japanese auto major Toyota to become the largest-selling car maker globally, so far, its journey in India hasn’t been smooth. Lowell Paddock, President & Managing Director of General Motors India, in an interview with Probal Basak, says the company missed an opportunity to explore the diesel market, as its small cars did not have diesel variants when preference for the fuel rose dramatically. However, he says an overhaul of the company’s business and new launches later this year may lead to a turnaround. Edited excerpts:
In 2011, General Motors sales were flat at 1,10,000 units and in the first half this year, sales dropped 11 per cent? Given the dwindling sales and the slowdown in the automobile industry, where do you expect the volumes to stand?
Currently, we are not present in all the key market segments. Mini B1, the segment in which we have our highest-selling Spark and Beat models, has seen a sharp decline. However, driven by strong demand for the Beat Diesel, Beat sales have outperformed the segment. Later this year, with the Sail and the Enjoy MPV, we will expand into the key Mini B2 and the small and MPV segments, respectively.
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In the overall market, sales continue to remain sluggish, owing to the high interest rates, high petrol prices, high commodity prices, nagging inflation, and negative market sentiment — there are too many factors to list! We expect the market to show some improvement after the monsoon and during the festival season, but it’s still difficult to say where our growth for the year would stand. I am hoping it would be six to eight per cent.
By 2010, you had eight products at different price points — the widest portfolio among the multinationals. However, your market share is a mere 4.2 per cent. What went wrong?
It’s more about the breadth of the portfolio than about continuously updating our portfolio to meet Indian requirements and expectations. The Beat was a bit slow to start. But we addressed this issue with the addition of the diesel variant, whose sales are steadily increasing. Last month, we sold 5,236 units, outselling the Figo. Similarly, our entries in the Mini B2 and small segment were not dieselised at a time when fuel preference shifted dramatically, but we would address the space with the new Sail. For the Tavera, the supply of engines is constrained. We are addressing this on a monthly basis. When we add the Enjoy MPV, and thus enter an entirely new segment, I expect our market share to grow significantly.
You have invested over a $1 billion in India in your plants in Halol and Telgaon to build a combined capacity of 2,25,000 cars. However, till now, only half the capacity is utilised. Is this a concern?
Our total capacity of 2,25,000 units is measured on a three-shift basis, and currently, we are running two shifts. We sized our plants based on the long-term potential — both for the overall market and for our products. We would fully utilise our installed capacity when several new products come on line later this year.
The market uncertainty is keeping everybody guessing. We are not an exception. So, it’s difficult to pinpoint an exact timeline. But we would certainly see much higher utilisation figures next year, with the addition of several new and revamped models.
Given the low tolerance of Indian consumers to high prices, do you think General Motors needs to localise more for aggressive pricing?
Localisation is a requirement for all manufacturers looking to succeed in India. All our products are competitively priced and stand out against competition in the market, in terms of their product attributes. As far as localisation is concerned, it ranges from 70 to 100 per cent, depending on the model, with the Tavera having a localisation of virtually 100 per cent. In the end, decisions on what components to localise and when to localise depend on two factors: economics and supplier capability. When it comes to capability, some technologies are not feasible for local production. But this list is shrinking fast and we are constantly looking for opportunities to source locally, with competitive suppliers.
You are phasing out the Aveo. The Optra is likely to meet the same fate. Are you working towards an overhaul of your portfolio?
All products have a shelf life. If we don’t respond aggressively to the increasingly demanding India market, we’re not going to keep pace. You’ll see a lot of freshness coming to the portfolio later this year.
What are your expectations from the Sail model?
I believe it would be a game-changer; it has already proven itself to be a game changer, even before coming to India. With sales of over 25,000 units in China last month, Sail has become the top-selling vehicle in the largest passenger-car market. It is also the number one model in highly competitive export markets, including Chile and Ecuador. In the first half of the year, Sail was the single highest-volume passenger car export from China. Our local engineering teams have worked hard to tailor the Sail to Indian requirements, starting with our globally proven 1.3 diesel engine and dozens of other modifications. We would produce this car at our state-of-the-art manufacturing facility in Talegaon. We’re very bullish about the Sail’s prospects.