By | Dr. Sundar Parthasarathy | Helping you with insights and actions for success
Such de-internationalization by a multinational company (by exiting overseas markets) is not uncommon. Just as internationalization is a result of making strategic choice(s), so is de-internationalization.
The Indian passenger vehicles (PV) market has come a long way since the introduction of the first “modern” (in its times) passenger car (“Maruti 800”) in 1983. SIAM statistics put the Indian PV market to be at a little over 3 million units in 2016-17. The pecking order by market size is China, US, Japan, and Germany markets are nearly 24.4, 6.9, 4.2 and 3.3 million units respectively (annual units, 2016 data). Though at the fifth position, India is the second fastest-growing market.
So, why would a global passenger vehicle company (ranked at no. 3 with nearly 10 million units in 2016 sales) decide to quit such a seemingly lucrative market? Especially, at a time when one often hears about the inspiring leadership of GM’s Chairperson & CEO, Ms. Mary Barra? Perhaps, the answer lies in the kind of leadership that Barra is known to show. Reports say that since the time she took on the CEO’s role in 2014, GM has shut down 13 plants and exited five markets cumulating to 26 million vehicle sales annually. Others write about how under Barra the “new” GM is relentlessly focused on RoI. The US government invested 50 billion USD in 2009, to aid GM in its chapter 11 filing that led to the recast of the firm into a “new GM.” The subsequent turnaround of GM provided the opportunity to the US Treasury to carry out a series of stock sales, resulting in the recovery of nearly 40 billion USD of that investment. It appears that GM is now poised to move further, from recovery to rejuvenation. It is clear that the company is reassessing its priorities and focusing its efforts towards a long term vision.
Despite a two-decade haul in India, the company has only managed to cling on to a #10 position in market share for PVs (1% share; while leaders are, Maruti – 47%; Hyundai – 18%; Mahindra – 7%; Toyota – 7%; Renault – 5% – all 2016 data). On the other hand, there are recent reports that GM wants to aggressively increase its market share in the US from its present level of 20%. The play rising commitment from major players can be seen in the US electric vehicles market, and GM is one of the top contenders from the old stable that intends to challenge aggressive and disruptive newcomer, Tesla (also see my post here: Disruption is a mild word). The present mood among the policy makers in the US on restoring US manufacturing (also see my post here: Location choice and insiderization) may also be something that could be encouraging GM’s plans in their home country.
Such de-internationalization by a multinational company (by exiting overseas markets) is not uncommon. Just as internationalization is a result of making strategic choice(s), so is de-internationalization. However, it is interesting to note that yesterday’s announcement by GM says that will continue its presence in India to export its PVs. The annual volume of PVs exported from India is 0.76 million (SIAM data, 2016-17). The PV exports from India is pegged at 8% CAGR over the past five years (as compared to 3% for domestic volumes in the same period). I recall seeing a small car, with “Maruti” written in Hindi, zip past my bus on my way from the airport to my hotel in Santiago (Chile) in 2004! In recent times, GM’s share in PV exports from India is 10% (about 60000 units) with Hyundai, Ford and Maruti doing about 150000, 138000 and 107000 respectively (all 2016 data). For a company that started operations in India only as recently as 2010, even Nissan exports about 100000 units (2016 data). So, it appears that GM wants to sweat its assets in India by tapping the demand for its brand of cars in in Mexico and South America. However, that is not as lofty a challenge as the one that Ford took when it announced in 2016 that it would export its made-in-India “Ecosport” to the US market, which arguably is more demanding and sophisticated. However, it must be noted that GMs PV exports from India were just above 20000 units in 2015. Such a fast growth may be an indication of stepping up the exports focus to achieve an improved financial performance out of India.
That brings us to the other question. Will GM ever come back to the Indian market? My answer to that, as a researcher in international business, is “likely,” and it is not an assertion at all. It is just that at the moment GM, like many well-run companies, is managing by priorities. It will likely return to the Indian market at a time it considers opportune – and its continuing engagements in India (though reduced in scope), will help in determining the timing, mode, and strategy of such a re-entry. And, GM could well be looking back at its past for some invaluable lessons that its poor market performance in India may hold.